Rothschild & Co · The alignment of interests between the Group and third party investors remains a key differentiator of our Merchant Banking business. During the first half of 2018

Rothschild & Co

Annual Report 2017

Half-year financial reportSix months to 30 June 2018

Half-year activity report 3

Condensed half-year consolidated financial statement

15

Statutory Auditors’ review on the half-year consolidated financial information

72

Persons responsible for the half-year

financial report

73

About Rothschild & Co

74

Contents

2

1. Corporate governance

In April 2018, the Group announced the appointment of Alexandre de Rothschild as Executive Chairman of

Rothschild & Co Gestion, Rothschild & Co’s Managing Partner. This followed the nomination of David de

Rothschild as Chairman of Rothschild & Co’s Supervisory Board. These changes took place on 17 May 2018.

The Group subsequently appointed François Pérol as a Managing Partner of Rothschild & Co Gestion. As of 1

September 2018, he and Robert Leitão, Managing Partner, became Co-Chairmen of the Group Executive

Committee (GEC). The composition of the GEC has been reorganised and is now supported by a Group

Operating Committee, led by Mark Crump, Group Chief Financial Officer, who will also take on the role of

Group Chief Operating Officer.

2. Summary Consolidated Income Statement

The Supervisory Board of Rothschild & Co SCA met on 25 September 2018 to review the consolidated

financial statements from 1 January 2018 to 30 June 2018; these accounts had been previously approved by

Rothschild & Co Gestion SAS, Managing Partner of Rothschild & Co.

As a result of the change in the financial year end in 2017, the statutory reporting for half-year results covers

the six months to June 2018 with comparatives for the six months to September 2017. To enable a better

understanding of the results, the press release presents the results for the six months to June 2018 with

comparatives for the six months to June 2017. The detailed statutory accounts are available in a separate

document, named “Half-year Financial report”, that contains the results with both sets of comparatives.

1 Diluted EPS is €2.10 (H1 2017: €1.28)

An analysis of Exceptional items and a presentation of Alternative Performance Measures are shown respectively in

Appendix B and Appendix G.

(in €m) Page 6m to June

2018

6m to June

2017Var Var %

Revenue 3 - 5 1,007 896 111 12%

Staff costs 6 (583) (497) (86) (17)%

Administrative expenses 6 (150) (156) 6 4%

Depreciation and amortisation (14) (16) 2 13%

Impairments 6 1 (10) 11 110%

Operating Income 261 217 44 20%

Other income / (expense) (net) 6 1 9 (8) (89)%

Profit before tax 262 226 36 16%

Income tax 7 (36) (41) 5 12%

Consolidated net income 226 185 41 22%

Non-controlling interests 7 (65) (88) 23 26%

Net income - Group share 161 97 64 66%

Exceptionals 9 3 8 (5) (63)%

Net income - Group share excl.

exceptionals164 105 59 56%

Earnings per share 2.14 € 1.31 € 0.83 € 63%

EPS excl. exceptionals 2.18 € 1.41 € 0.77 € 55%

Return On Tangible Equity (ROTE) 19.0% 13.6%

ROTE excl. exceptionals 19.4% 14.8%

Half-year activity report

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active, ranking 1 in Europe and 3 globally by numbers of completed Restructuring transactions

3. Business activities

3.1 Global Advisory

Our Global Advisory business focuses on providing advice in the areas of M&A and strategic advisory, and

Financing Advisory encompassing Debt Advisory, Restructuring and Equity Advisory.

For the first half of 2018, Global Advisory delivered excellent first six months revenue of €636 million, up

15% compared to the same period last year (H1 2017: €554 million). For the last twelve months to June 2018,th th

the business ranked 4 by global financial advisory revenue, up from 6 position based on the same measure as at December 2017.

Excluding ongoing investment in the development of our North American M&A franchise, operating income for the first half of 2018 was €117 million, representing an operating income margin of 18.4% (H1 2017:

20.0%). The operating income margin for the period continues to be towards the top end of our target range over the cycle, albeit down from the same period last year. The twelve months to December 2017 operating

income margin provides a more representative comparative at 17.8%.

Including investment in North America M&A, the operating income for H1 2018 was €107 million, representing

an operating income margin of 16.8% (H1 2017: 17.5% - 2017: 15.7%).

stIn M&A advisory, we are outperforming compared to the overall M&A market, ranking 1 globally and in Europe by number of completed transactions1 in first half of 2018. M&A advisory delivered excellent six months revenue of €490 million, up 33% compared to H1 2017. This was driven by some large advisory fees and strong revenue performance in our UK business and our continental European businesses, where we

have advised clients on some of the largest and most complex M&A transactions completed during the period.

Financing Advisory revenue was down by 21% to €146 million in the first half of 2018 compared to the same

stage in 2017, which was a record for Financing Advisory revenue. Despite this, we continued to be highlyst rd 2

during the first half of 2018 and maintaining our position as adviser on more European equity capital market assignments than any other independent financial adviser3.

The quality of our people is our principal competitive advantage and we continue to add to and strengthen our senior team. During the first six months of 2018, we reinforced our US Industrials sector coverage with the recruitment of two new Managing Directors and hired a new head of our global advisory business in Greater China.

Global Advisory advised the following clients on significant advisory assignments that completed in the six months to June 2018:

Westfield on its combination with Unibail-Rodamco (€61 billion, Australia and France)

Bayer on its all-cash offer to acquire Monsanto (US$66 billion, Germany and United States)

Zodiac Aerospace on its combination with Safran (€35 billion, France)

Melrose Industries on its hostile cash and share offer for GKN (£8.1 billion, UK)

A.P. Moller-Maersk on its sale of Maersk Oil to Total (US$7.45 billion, Denmark and France)

Energy Future (adviser to second lien creditors) on its restructuring (US$41.8 billion, United States)

In addition, we are working on some of the largest and most complex announced transactions globally,

including acting as financial advisor to:

The Coca-Cola Company on its acquisition of Costa Coffee (US$5.1 billion, United States and UK)

Prudential on its demerger into Prudential and M&G Prudential (£47 billion, UK)

Essilor on its combination with Luxottica (€47 billion, France and Italy)4

1 Source : Thomson Reuters. Excludes accountancy firms

2 Source : Thomson Reuters

3 Source: Dealogic

4 Completed in Q3 2018

4

Alstom on its combination with Siemens Mobility to create Siemens Alstom (€13 billion, France and

Germany)

Pinnacle Foods on its sale to Conagra Brands (US$10.9 billion, United States)

(US$100Government of Puerto Rico on its restructuring of financial claims and pension obligations

billion, United States)

For further examples of Global Advisory assignments completed during 2018, please refer to Appendix F.

3.2 Wealth & Asset Management

Wealth & Asset Management is made up of Rothschild Martin Maurel in France and Monaco, our Wealth Management businesses in Switzerland, the UK, Belgium, Germany, Italy and Asia, and our Asset Management business in North America.

For the first half of 2018, revenue was €261 million, up 3% (H1 2017: €254 million) mainly due to organic growth in all the geographies.

Following a number of initiatives undertaken over the last two years to build revenue, cut costs and refocus the business on its core activities, we have seen growth in profitability of 21% with operating income, excluding Martin Maurel integration costs of €5 million, rising to €49 million for the first half of 2018 (H1 2017: €40 million excluding Martin Maurel integration costs of €12 million). This represents a 19% operating margin (H1 2017:

16%), close to our 2020 target of 20%.

The operational integration, following the merger of the two private banks in France of Rothschild & Co and Martin Maurel Group in 2017, is progressing as anticipated and will be finalised by the end of 2018. In addition, we bought out the 45% minority position of Banca Sella in the Monaco subsidiary of Martin Maurel in January 2018 for €14 million.

Assets under Management amounted to €68.9 billion as at 30 June 2018 (31 December 2017: €67.3 billion)

thanks to strong net inflows of €2.0 billion slightly offset by a market depreciation and exchange rate effects of

€0.4 billion. Net new assets were driven by inflows in Wealth Management across all major geographies of

€1.9 billion and of €0.1 billion in Asset Management.

The table below presents the progress in Assets under Management (AuM).

In € billion 6m to

June 2018

6m to

June 2017

12m to

June 2018

AuM opening 67.3 54.0 66.8

Martin Maurel merger 10.0

Net new assets 2.0 1.3 2.4

Market and exchange rate (0.4) 1.5 (0.3)

AuM closing 68.9 66.8 68.9

3.3 Merchant Banking

Merchant Banking is the investment arm of the Rothschild & Co Group which deploys the firm’s and third parties’ capital in private equity and debt opportunities.

Merchant Banking continued to perform strongly during the first half of 2018 generating revenue of €105

million up 57% (H1 2017: €67 million). When compared to the average first half year revenue for the last

three years, revenue is up 72%.

Revenue comprises two main sources:

Recurring revenue of €36 million includes management fees net of placement fees (H1 2017: €28 million),

Investment performance related revenue of €69 million (H1 2017: €39 million) comprised:

– €24 million of carried interest (H1 2017: €13 million),

– and €45 million of realised and unrealised investment gains and dividends (H1 2017: €26 million).

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Operating income rose to €71 million for the first half of 2018 (H1 2017: €36 million), representing a 68%

operating margin (H1 2017: 54%).

To measure the performance of this investing business, we look at the RORAC (Return On Risk Adjusted

Capital - being adjusted profit before tax divided by an internal measure of risk capital invested in the business

on a rolling three years basis). As at 30 June 2018, RORAC was 28% (30 June 2017: 24%).

The increase of revenue and operating income reflects both the continuing strong performance of funds in

terms of value creation, as well as the growth in management fees driven by the rising level of Assets under

Management (AuM). Investment performance was particularly strong in the Five Arrows Principal Investments

(FAPI) business line (European primary corporate private equity) which continued to generate significant

returns both in terms of investment income and carried interest. Management fees have grown 34% following

the growth in number of funds and AuM. As the Merchant Banking business continues to mature, we expect

this revenue category to increase its share of our revenue mix, providing a stronger flow of recurring income.

The alignment of interests between the Group and third party investors remains a key differentiator of our

Merchant Banking business. During the first half of 2018 the Group’s share of the investment made by the

division amounted to €51 million, of which €46 million was the Group’s own investments in funds managed by

Merchant Banking and €5 million were invested in proprietary investments (including those made as part of the

Rothschild Private Opportunities co-investment programme).

Disposals generated proceeds of €61 million for the Group mainly driven by the FAPI I disposal of Datix, a

global leader in patient safety and risk management solutions (4.5x MOIC1) and the dividend recapitalisation of

The Binding Site, a specialist provider of tests for the detection of cancers. In the final part of the second

quarter 2018 other significant disposals of the FAPI I investment portfolio have been agreed albeit with closing

dates set in the third quarter (Prospitalia, a leading German provider of purchasing and software solutions for

the healthcare industry - 8.0x MOIC, Forno d’Asolo, an Italian frozen bakery manufacturer - 3.9x MOIC and

Etanco, a French supplier of mechanical fasteners - 1.4x MOIC). Portfolio valuations as at 30 June 2018

reflect the agreed exit values, whereas proceeds (including carried interest payments) will occur in the second

half of 2018.

Evolution in asset value of the Group’s Merchant Banking assets

1 MOIC stands for Multiple On Invested Capital

411

24

63 (55)

443

115

27

2 (6)

138

52651

65

(61)

581

Asset value31 Dec 2017

Additions Value creation Disposals Asset value30 June 2018

Private Equity Private Debt

in € million 30 June 2018 31 December 2017

Managed private funds 441 386

Rothschild proprietary investments & other 140 140

Total gross assets 581 526

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Thanks to the team’s strong track record in private equity and private debt, the division continues to expand.

Starting from 2017 and through the first half of 2018, Merchant Banking has been actively expanding its

geographical footprint launching Five Arrows Capital Partners (FACP), the first generation primary private

equity fund focused on the North American market. FACP's investment strategy is focused on high-quality,

lower middle-market companies across the United States and Canada valued between $75 million to $500

million. Investments are primarily focused in three industry segments: Healthcare & Education, Business

Services and Data, Software & Technology-enabled Services which have the potential to provide significant

room for value creation with a balanced risk exposure. The fund has recently completed its fundraising phase

reaching $655 million, in excess of its original target, from a globally diversified group of both new and existing

investors including financial institutions, family offices, corporates and private clients. The Group invested

alongside third-party investors in line with Merchant Banking strategy.

In the first half of 2018, in addition to FACP, Merchant Banking expanded its private debt and credit

management franchises, with:

the final closing of Five Arrows Direct Lending (FADL) at €655 million, European unitranche debt facilities;

the first closing of Elsinore (€63 million), a multi-strategy credit fund,

and the launch of Oberon USA (AuM of €75 million as at 30 June 2018), an open-ended fund investing in

US senior secured loans.

The division also continued to expand its CLO base, finalising the Contego V vehicle at €400 million and launching two new CLO vehicles in the European and US market (Contego VI and Ocean Trails VII).

Merchant Banking’s assets under management were €9.3 billion as at 30 June 2018 compared to €8.3 billion as at 31 December 2017.

4. Consolidated financial results

4.1 Revenue

For H1 2018, revenue was €1,007 million (H1 2017: €896 million), representing an increase of €111 million or +12%.

The uplift was largely due to Global Advisory and Merchant Banking where revenue increased respectively by

€82 million and €38 million. The translation impact of exchange rate fluctuations impacted revenue negatively

by €29 million.

4.2 Operating expenses

4.2.1 Staff costs

For H1 2018, staff costs were €583 million (H1 2017: €497 million), representing an increase of €86 million, largely due to higher variable compensation in connection with excellent revenues in Global Advisory. The translation impact of exchange rate fluctuations resulted in a decrease in staff costs of €21 million.

The adjusted Group’s compensation ratio, as defined in the Appendix G on Alternative Performance Measures, was 62.2% as at 30 June 2018 (H1 2017: 62.0%). When adjusting for the effects of senior hiring in

the US for the advisory business, and exchange rates, the ratio is 61.1% (H1 2017: 60.8%).

Overall Group headcount increased from 3,502 as at 31 December 2017 to 3,570 as at 30 June 2018, largely

due to new junior staff recruitment and hires in the US.

4.2.2 Administrative expenses

For H1 2018, administrative expenses were €150 million (H1 2017: €156 million), a net decrease of €6 million mainly due to the reduction of Martin Maurel integration costs (€5 million for H1 2018 versus €12 million for H1 2017). The translation impact of exchange rate fluctuations resulted in a decrease in administrative expenses of €4 million.

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4.2.3 Depreciation and amortisation

For H1 2018, depreciation and amortisation was €14 million (H1 2017: €16 million), representing a decrease of

€2 million. The translation impact of exchange rate fluctuations resulted in a decrease in depreciation and amortisation of €1 million.

4.2.4 Impairment charges and loan provisions

For H1 2018, impairment charges and loan provisions were a credit of €1 million (H1 2017: charge of €10

million) due to a reassessment of certain credit risks.

4.3 Other income / (expenses)

For H1 2018, other income and expenses, which include results from equity accounted companies and gains / losses on disposal of subsidiaries and associates, was a net income of €1 million (H1 2017: income of €9 million). The decrease mainly results from a one-off gain of €3 million in H1 2017 relating to the Martin Maurel merger and a central impairment charge of €4 million in H1 2018.

4.4 Income tax

For H1 2018, the income tax charge was €36 million (H1 2017: €41 million) comprising a current tax charge of

€26 million and a deferred tax charge of €10 million, giving an effective tax rate of 13.8% (H1 2017: 18.2%).

4.5 Non-controlling interests

For H1 2018, the charge for Non-controlling interests was €65 million (H1 2017: €88 million). This mainly comprises interest on perpetual subordinated debt and preferred dividends payable to French partners that

decreased over the period in line with the performance of the French Global Advisory business.

5. Financial structure

The Group continues to maintain a high level of liquidity. As at 30 June 2018, total liquid assets as a percentage of total assets was 61% (59% at 31 December 2017).

The Group is regulated by the French Prudential and Resolution Authority (ACPR: Autorité de Contrôle Prudentiel et de Résolution) as a financial company (Compagnie Financière).

From January 2018, Tier 2 capital is no longer recognised (€64 million in December 2017 ratio). The capital ratios include the benefit of the group profits for the 6 months to June 2018 less foreseeable dividend for that period as approved by the ACPR.

The ratios set out below, under full application of the Basel 3 rules, are comfortably above the minimum requirement:

30/06/2018 31/12/2017

Full Basel 3 minimum with the CCB

(Capital Conservation Buffer)

Common Equity Tier 1 ratio 20.9% 18.7% 7.0%

Global solvency ratio 20.9% 19.5% 10.5%

6. Edmond de Rothschild

In June 2018, Rothschild & Co reached an agreement with Edmond de Rothschild on the use of their

respective brands. On 6 August 2018, the two groups also unwound all of their cross shareholdings. These

mainly included:

8.4% of the capital of Edmond de Rothschild held by Rothschild Holding AG (Rothschild & Co's holding

company in Switzerland),

9.5% of the capital of Rothschild Holding AG held by Edmond de Rothschild ; and

5.7% of the capital of Rothschild & Co held by Edmond de Rothschild (4.4 million of shares).

To implement these transactions, Edmond de Rothschild delivered 1.9 million Rothschild & Co shares to

Rothschild Holding AG as settlement for the difference in value in respect of the investments in Edmond de

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Rothschild and in Rothschild Holding AG. Rothschild & Co purchased the remaining 2.5 million Rothschild &

Co shares held by Edmond de Rothschild for €75 million in cash. The Edmond de Rothschild and Rothschild &

Co shares were valued on the basis of their market values (respectively CHF17,000 and €30).

The impact of these transactions on a pro forma basis would be to reduce the CET1 ratio as at 30 June 2018

from 20.9% to 19.5%. Further, they will have a mildly accretive effect on earnings per share in the short term.

7. Outlook

In Global Advisory, although the value of announced deals increased in the first half of 2018, completions for

both number and value of deals continued to decline. Despite this trend, we have succeeded in gaining market

share during the first half of the year as evidenced by the improvement in our revenue ranking. We expect

healthy activity levels during the rest of 2018, similar to 2017, although the Group remains alert to the risk of

volatility. Our focus remains on growing the business, particularly our North American M&A franchise whose

revenue has been increasing as a result of ongoing investment and where we foresee strong potential for

growth.

Wealth & Asset Management is well positioned to deliver net asset inflows and improving profitability. Our

strategy of focussing on our core target markets, leveraging our network and targeting entrepreneurs is

bearing fruit across our geographies. In France, the operational integration of Martin Maurel is on track to be

finalised by the end of the year.

Merchant Banking is committed to continuing its assets under management growth trajectory and its

contribution to the Group’s results. Within private equity funds, the division will be focused on the deployment

of the recently closed North American primary private equity fund while starting the fundraising activities for

our third generation primary equity fund in Europe. Within private debt, the focus will be on deploying capital,

whereas in credit management we plan to expand our portfolio of institutional clients, with dedicated

investment mandates focused on senior secured loans and credit strategies. Our portfolios’ performance

remains strong but, consistent with our investment philosophy, we remain cautious in our capital deployment

decisions, focusing on attractive risk-reward opportunities with appropriate downside protection features.

The first half results were very strong and included some large advisory fees and value accretions in Merchant

Banking which are unlikely to be repeated in the second half. Further, if financial markets remain uncertain

due to macro events through the second half of 2018 that could impact market sentiment with a negative effect

on our businesses. However, provided markets continue to be benign, we would expect our annual results to

improve reasonably compared to 2017.

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A. Performance by business

1 IFRS reconciliation mainly reflects: the treatment of profit share paid to French partners as non-controlling interests; accounting for

deferred bonuses over the period that they are earned; the application of IAS 19 for defined benefit pension schemes; a central impairment provision in Other income / (expenses) from other assets and reallocation of impairments and certain operating income and expenses.

B. Exceptional items

(in €m)Global

Advisory

Wealth & Asset

Management

Merchant

Banking

Other

businesses and

corporate centre

IFRS

reconciliation 1

6m to June

2018

Revenue 636 261 105 15 (10) 1,007

Operating expenses (529) (217) (34) (30) 63 (747)

Impairments - - - - 1 1

Operating income 107 44 71 (15) 54 261

Other income / (expense) - - - - 1 1

Profit before tax 107 44 71 (15) 55 262

Exceptional charges / (profits) - 5 - - - 5

PBT excluding exceptional

charges / profits107 49 71 (15) 55 267

Operating margin % 17% 19% 68% - - 27%

(in €m)Global

Advisory

Wealth & Asset

Management

Merchant

Banking

Other

businesses and

corporate centre

IFRS

reconciliation 1

6m to June

2017

Revenue 554 254 67 17 4 896

Operating expenses (457) (226) (31) (32) 77 (669)

Impairments - - - - (10) (10)

Operating income 97 28 36 (15) 71 217

Other income / (expense) - - - - 9 9

Profit before tax 97 28 36 (15) 80 226

Exceptional charges / (profits) - 12 - - - 12

PBT excluding exceptional

charges / profits97 40 36 (15) 80 238

Operating margin % 18% 16% 54% - - 27%

(in €m)

PBT PATMI EPS PBT PATMI EPS

Results as reported 262 161 2.14 € 226 97 1.31 €

Exceptional items

- Martin Maurel integration costs (5) (3) (0.04) € (12) (8) (0.10) €

Total exceptional (Costs) / Gains (5) (3) (0.04) € (12) (8) (0.10) €

Results excluding Exceptionals 267 164 2.18 € 238 105 1.41 €

6m to June

2018

6m to June

2017

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C. Summary Consolidated Balance sheet

The foreign exchange translation effect between 30 June 2018 and 31 December 2017 has no material effect

on the balance sheet.

D. FX rates

(in €bn) 30/06/2018 31/12/2017

Cash and amounts due from central banks 4.9 3.9

Loans and advances to banks 1.9 1.7

Loans and advances to customers 3.0 3.0

of which Private client lending 2.5 2.4

Debt and equity securities 2.1 2.1

Other assets 1.4 1.4

Total assets 13.3 12.1

Due to customers 9.3 7.8

Other liabilities 1.6 1.9

Shareholders' equity - Group share 2.0 1.9

Non-controlling interests 0.4 0.5

Total capital and liabilities 13.3 12.1

Rates6m to June

2018

6m to June

2017Var

€ / GBP 0.8798 0.8602 2%

€ / CHF 1.1649 1.0776 8%

€ / USD 1.2062 1.0936 10%

P&L

Rates 30/06/2018 31/12/2017 Var

€ / GBP 0.8843 0.8877 (0)%

€ / CHF 1.1593 1.1702 (1)%

€ / USD 1.1670 1.2008 (3)%

Balance sheet

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E. Quarterly progression of revenue

In €m 2018

2017

Var

Global Advisory

1st quarter 261.7 328.2 (20%)

2nd

quarter 374.4 225.4 +66%

Total 636.1 553.6 +15%

Wealth & Asset Management

1st quarter 131.0 128.3 +2%

2nd

quarter 130.4 125.6 +4%

Total 261.4 253.9 +3%

Merchant Banking

1st quarter 25.2 19.5 +29%

2nd

quarter 79.8 47.5 +68%

Total 105.0 67.0 +57%

Other businesses and corporate

centre

1st quarter 6.9 3.5 +97%

2nd

quarter 8.3 13.5 (39%)

Total 15.2 17.0 (11%)

IFRS reconciliation

1st quarter (4.7) 7.7 (161%)

2nd

quarter (6.5) (3.5) +86%

Total (11.2) 4.2 N/A

Total Group

Revenue

1st

quarter 420.1 487.2 (14%)

2nd

quarter 586.4 408.5 +44%

Total 1,006.5 895.7 +12%

F. Global Advisory track record

Global Advisory advised the following clients on notable transactions completed in the six months to 30

June 2018.

M&A and strategic advisory

Accor Hotels, the leading travel group, on its disposal of a majority stake in AccorInvest (€6.25

billion, France)

Kering, the luxury fashion brand group, on its distribution of a 70% stake in PUMA (€5.1 billion,

France and Germany)

Informa, the events and publishing company, on its combination with UBM (£4.3 billion, UK)

PAI Partners and British Columbia Investment Management Corporation on its public-to-private

acquisition of Refresco, the independent bottler of soft drinks for retailers (€3.3 billion, Netherlands)

3i Group on its disposal of a 65% stake in Scandlines, the ferry operator servicing routes between

Germany and Denmark (€2.5 billion, Germany)

ITALO, the largest private European high-speed railway operator, on its dual track IPO and sale

process leading to its sale to Global Infrastructure Partners (€2.4 billion, Italy)

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Baupost, a hedge fund, on its acquisition of assets relating to Westinghouse Electric Company from

Toshiba Corporation (US$2.26 billion, United States and Japan)

Allianz, the leading insurer and asset manager, on its minority shareholders buy-out of Euler

Hermes (€1.85 billion, Germany and France)

Ferguson, the world's largest trade distributor of plumbing and heating products, on its sale of

STARK to Lone Star (€1.03 billion, UK and Denmark)

SK Capital on its acquisition of Israel Chemical’s fire safety and oil additives business units (US$1

billion, Israel)

Financing Advisory

EG Group, the largest independent forecourt and convenience store retailer in Europe, on its cross-

border refinancing (€3.5 billion, UK)

Empresas ICA, Mexico's largest infrastructure company, on its in-court restructuring and capital

raise

(US$3.4 billion, US$215 million, respectively, Mexico)

Greece’s Public Debt Management Agency on its seven year bond issuance with a 3.375% coupon

(€3 billion, Greece)

OCI, the fertilizer and industrial chemicals company, on its recapitalisation, including High Yield

Bond and credit facility (US$2.2 billion, Netherlands)

Republic of Cote d'Ivoire on its dual-tranche 12 & 30 year EUR denominated Eurobond (€1.7 billion,

Ivory Coast)

Société des hydrocarbures du Tchad, the state-owned oil company of the Republic of Chad, on its

oil-backed loan restructuring (US$1.3 billion, Chad)

CEVA, the supply chain management company, on its IPO on the SIX Swiss Exchange (US$890

million, Switzerland)

Avast, the antivirus security software company, on its IPO on the London Stock Exchange (£692

million, Czech Republic)

Corporacion America Airports, the largest private sector airport concession operator in the world, on

its IPO on the New York Stock Exchange (US$486 million, Argentina)

13

G. Alternative performance measures (APM) - Article 223-1 of the AMF’s General Regulation

Alternative

Performance

Measures

Definition Reason for use Reference to the

data in the Press

release / Investor

presentation

Net income – Group share excluding exceptionals

Net income attributable to equity holders excluding exceptional items To measure Net result Group share of Rothschild & Co excluding exceptional items of a significant amount

In the Press release, please refer to Appendix B.

EPS excluding exceptionals

EPS excluding exceptional items To measure Earnings per share excluding exceptional items of a significant amount

In the Press release, please refer to Appendix B.

Adjusted compensation ratio

Ratio between adjusted staff costs divided by consolidated Net Banking Income of Rothschild & Co.

Adjusted staff costs represent:

1. staff costs accounted in the income statement (which include the effects of accounting for deferred bonuses over the period in which they are earned as opposed to the “awarded” basis),

2. to which must be added the amount of profit share paid to the French partners,

3. from which must be deducted redundancy costs, revaluation of share-based employee liabilities and business acquisition costs treated as employee compensation under IFRS,

- which gives Total staff costs in calculating the basic compensation ratio

4. from which the investment costs related to the recruitment of senior bankers in the United States must be deducted,

5. the amount of adjusted staff costs is restated by the exchange rate effect to offset the exchange rate fluctuations from one year to the next one,

- which gives the adjusted staff costs for compensation ratio.

To measure the proportion of Net Banking Income granted to all employees.

Key indicator for competitor listed investment banks.

Rothschild & Co calculates this ratio with adjustments to give the fairest and closest calculation to the one used by other comparable listed companies.

Please refer:

- in the Press release

to § 4.2 Operating expenses / Staff costs and

- in the Investor presentation to slide 27

Return on Tangible Equity (ROTE) excluding exceptional items

Ratio between Net income - Group share excluding exceptional items and

average tangible equity Group share over the period.

Tangible equity corresponds to total equity Group share less intangible assets

and goodwill.

Average tangible equity over the period equal to the average between tangible equity as at 31 December 2017 and 30 June 2018.

To measure the overall

profitability of Rothschild & Co excluding exceptional items on the equity capital in the business

In the Investor

presentation release, please refer to slide 37

Business Operating margin

Each Business Operating margin is calculated by dividing Profit before tax relative to revenue, business by business.

It excludes exceptional items.

To measure business’ profitability

Please refer to § 3

Return on Risk Adjusted Capital (RORAC)

Ratio of an adjusted profit before tax divided by an internal measure of risk

adjusted capital deployed in the business on a rolling 3-year basis.

The estimated amount of capital and debt which management believes would

be reasonable to fund the Group’s investments in Merchant Banking products is

consistent with its cautious approach to risk management. Based on the mix of

its investment portfolio as of the reporting dates, management believes that this

“risk-adjusted capital” (RAC) amounts to c. 70% of the Group’s investments net

asset value and that the remainder could be funded by debt. This percentage

broadly represents the weighted average of 80% for equity exposures, 50% for

junior credit exposures, 40% for CLO exposures in vertical strips and 33% for

senior credit exposures.

To calculate the RORAC, Merchant Banking profit before tax is adjusted by a

notional 2.5% cost of debt, computed as per the above (i.e. 30% of the Group’s

investments NAV), divided by the RAC.

Disclosed RORAC is calculated on a 3-year rolling period average to account for the inevitable volatility in the financial results of the business, primarily

relating to investment income and carried interest recognition.

To measure the performance of

the Merchant Banking business

In the Investor presentation release, please refer to slide 37

14

Consolidated balance sheet as at 30 June 2018 18

Consolidated income statement for the six months ended 30 June 2018 19

Statement of comprehensive income for the six months ended 30 June 2018 20

Consolidated statement of changes in equity for the six months ended 30 June 2018 21

Cash flow statement for the six months ended 30 June 2018 22

Notes to the consolidated financial statements 23

Condensed half-year consolidated financial statement

15

Abbreviations and glossary

Term DefinitionACPR Autorité de Contrôle Prudentiel et de Résolution (French Prudential and Resolution Authority)

AFS Available for sale

bp Basis point

Category 1/2/3/4/5 Classification of credit risk rating by the Group, explained in section 5.2.1

CFMM Compagnie Financière Martin Maurel

CGU Cash-generating Unit

Company Rothschild & Co SCA

CRD4 Capital Requirements Directive 4

DCF Discounted cash flow

EAD Exposure at default (IFRS 9)

ECL

EdRS Edmond de Rothschild (Suisse) SA

Equity Scheme

FVOCI Fair value through other comprehensive income

FVTPL Fair value through profit or loss

GA Global Advisory (business segment)

GEC Group Executive Committee

GFSC Guernsey Financial Services Commission

Group Rothschild & Co SCA consolidated group

IFRS International Financial Reporting Standards

LCR Liquidity Coverage Ratio

Level 1/2/3 IFRS 13 fair value classifications, explained in section 5.5.1

LGD Loss given default (IFRS 9)

Lombard lending Lending secured against portfolios of securities

LTV Loan to value

Managing Partner Rothschild & Co Gestion SAS (the gérant )

MB / Merchant Banking Merchant Banking (business segment)

NCI Non-controlling interest

NMR N M Rothschild & Sons Limited

NMROP N M Rothschild & Sons Limited overseas pension fund

NMRP N M Rothschild & Sons Limited pension fund

OCI Other comprehensive income

PCL Private Client Lending (business line)

PD Probability of default (IFRS 9)

POCI Purchased or originated credit-impaired financial asset

R&Co Rothschild & Co SCA

R&Co Gestion Rothschild & Co Gestion SAS (the gérant /Managing Partner)

RBI Rothschild Bank International Limited

R&Co operates a scheme for certain senior staff where participants are required to invest in R&Co shares and for each share owned they are granted four share options.

Expected credit loss (IFRS 9), which can be measured on either a 12-month basis (12m ECL) or a lifetime basis (lifetime ECL)

16

Term DefinitionRBZ Rothschild Bank AG Zurich

RBZP Rothschild Bank AG Zurich pension funds

RCB Rothschild & Compagnie Banque SCS

RHAG Rothschild Holding AG

RMM Rothschild Martin Maurel SCS

SICR Significant increase in credit risk

SPPI Solely payments of principal and interest (IFRS 9)

Stage 1/2/3 IFRS 9 credit quality assessments, explained in section 5.2.2

Supervisory Board Rothschild & Co Supervisory Board

WAM Wealth & Asset Management (business segment)

17

Consolidated balance sheet as at 30 June 2018

AssetsIn thousands of euro Notes 30/06/2018 31/12/2017

Cash and amounts due from central banks 4,859,507 3,868,907

Financial assets at fair value through profit or loss 1 1,128,249 548,014

Financial assets at fair value through other comprehensive income 3 249,518 -

Available-for-sale financial assets 4 - 1,596,343

Securities at amortised cost 5 761,491 -

Loans and advances to banks 6 1,939,045 1,730,153

Loans and advances to customers 7 3,032,272 2,989,919

Current tax assets 22,332 25,786

Deferred tax assets 14 45,738 60,561

Other assets 8 640,252 651,863

Investments accounted for by the equity method 12,460 11,817

Tangible fixed assets 343,087 346,640

Intangible fixed assets 165,062 162,574

Goodwill 123,296 123,162

TOTAL ASSETS 13,322,309 12,115,739

Liabilities and shareholders’ equityIn thousands of euro Notes 30/06/2018 31/12/2017

Financial liabilities at fair value through profit or loss 1 20,036 24,823

Hedging derivatives 2 6,015 6,543

Due to banks and other financial institutions 9 502,091 636,377

Customer deposits 10 9,263,028 7,770,954

Debt securities in issue 20,006 95,561

Current tax liabilities 25,952 30,970

Deferred tax liabilities 14 58,806 60,935

Other liabilities, accruals and deferred income 11 881,123 949,377

Provisions 12 65,923 88,270

TOTAL LIABILITIES 10,842,980 9,663,810

Shareholders’ equity 2,479,329 2,451,929

Shareholders’ equity - Group share 2,047,885 1,911,720

Share capital 154,925 154,815

Share premium 1,141,559 1,140,706

Consolidated reserves 633,613 451,934

Unrealised or deferred capital gains and losses (43,273) (26,344)

Net income - Group share 161,061 190,609

Non-controlling interests 16 431,444 540,209

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 13,322,309 12,115,739

The Group has applied IFRS 9 and IFRS 15 for the first time as at 1 January 2018. The Group has used the exemption in IFRS 9 to notrestate its prior periods. It also applied IFRS 15 using the cumulative effect method, under which comparative information is not restated.

18

In thousands of euro Notes

01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

+ Interest income 19 68,371 67,937

- Interest expense 19 (29,312) (29,081)

+ Fee income 20 927,583 779,235

- Fee expense 20 (47,517) (47,518)

+/- Net gains/(losses) on financial instruments at fair value through profit or loss 21 87,599 54,199

+/- Net gains/(losses) on financial assets at fair value through other comprehensive income 22 - -

+/- Net gains/(losses) on derecognition of assets held at amortised cost (145) -

+/- Net gains/(losses) on available-for-sale financial assets 23 - 28,752

+ Other operating income 257 282

- Other operating expenses (320) (1,460)

Net banking income 1,006,516 852,346

- Staff costs 24 (582,469) (488,247)

- Administrative expenses 24 (150,440) (146,426)

- Amortisation, depreciation and impairment of tangible and intangible fixed assets (13,779) (14,319)

Gross operating income 259,828 203,354

+/- Cost of risk 25 578 (4,356)

Operating income 260,406 198,998

+/- Net income from companies accounted for by the equity method 728 875

+/- Net income/(expense) from other assets 26 639 5,759

Profit before tax 261,773 205,632

- Income tax expense 27 (36,255) (29,672)

CONSOLIDATED NET INCOME 225,518 175,960

Non-controlling interests 16 64,457 87,759

NET INCOME - GROUP SHARE 161,061 88,201

30 2.14 1.18

30 2.10 1.15

Consolidated income statement for the six months ended 30 June 2018

Earnings per share in euro - Group share (basic)

Earnings per share in euro - Group share (diluted)

19

In thousands of euro

01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Consolidated net income 225,518 175,960

Gains and losses recyclable in profit or loss

Translation differences 5,834 (59,582)

Revaluation of available-for-sale financial assets - 5,047

Gains and losses transferred to income on available-for-sale financial assets - (22,427)

Gains and losses recognised directly in equity for companies accounted for by the equity method 83 (396)

Taxes - (101)

Total gains and losses recyclable in profit or loss 5,917 (77,459)

Gains and losses not recyclable in profit or loss

Remeasurement gains/(losses) on defined benefit pension funds 43,522 23,122

Gains/(losses) relating to equity instruments at fair value through comprehensive income (8,211) -

Taxes (6,256) (4,402)

Total gains and losses not recyclable in profit or loss 29,055 18,720

Gains and losses recognised directly in equity 34,972 (58,739)

TOTAL COMPREHENSIVE INCOME 260,490 117,221

attributable to equity shareholders 193,589 46,120

attributable to non-controlling interests 66,901 71,101

Statement of comprehensive income for the six months ended 30 June 2018

20

SHAREHOLDERS' EQUITY AT 31

MARCH 20171,293,467 495,189 (18,168) 58,467 - 1,828,955 471,575 2,300,530

Impact of elimination of treasury shares - 3,331 - - - 3,331 57 3,388

Dividends (2) - (51,511) - - - (51,511) (2,644) (54,155)

Issue of shares 2,055 - - - - 2,055 18 2,073

Capital increase related to share-based payments

- 539 - - - 539 - 539

Interest on perpetual subordinated debt - - - - - - (10,636) (10,636)

Effect of a change in shareholding without a change of control

(1) (3,482) 9,318 637 - 6,472 (22,619) (16,147)

Other movements - (24) 152 (98) - 30 (67) (37)

Sub-total of changes linked

to transactions with shareholders2,054 (51,147) 9,470 539 - (39,084) (35,891) (74,975)

2017 net income for the nine months - 190,609 - - - 190,609 124,310 314,919

Net gains/(losses) from changes in fair value

- - - 21,934 - 21,934 439 22,373

Net (gains)/losses transferred to income on disposal and impairment

- - - (47,023) - (47,023) (51) (47,074)

Remeasurement gains/(losses) on defined benefit funds

- 7,689 - - - 7,689 817 8,506

Translation differences and other movements

- 203 (50,639) (924) - (51,360) (20,990) (72,350)


DECEMBER 20171,295,521 642,543 (59,337) 32,993 - 1,911,720 540,209 2,451,929

Impact of introduction of IFRS 9 (net of

tax) - section 3.1.3 - 7,716 - (32,993) 20,433 (4,844) (91) (4,935)


JANUARY 20181,295,521 650,259 (59,337) - 20,433 1,906,876 540,118 2,446,994

Impact of elimination of treasury shares - (409) - - - (409) 1 (408)

Dividends (2) - (52,255) - - - (52,255) (156,844) (209,099)

Issue of shares 963 - - - - 963 408 1,371

Capital increase related to share-based payments

- 655 - - - 655 - 655

Interest on perpetual subordinated debt - - - - - - (7,407) (7,407)

Effect of a change in shareholding without a change of control

- (1,734) 173 - 3 (1,558) (12,096) (13,654)

Other movements - 478 (241) - (211) 26 358 384

Sub-total of changes linked

to transactions with shareholders963 (53,265) (68) - (208) (52,578) (175,580) (228,158)

2018 net income for the six months - 161,061 - - - 161,061 64,457 225,518

Net gains/(losses) from changes in fair value

- - - - (6,824) (6,824) (755) (7,579)

Net (gains)/losses transferred to income on disposal and impairment

- - - - - - - -

Remeasurement gains/(losses) on defined benefit funds

- 36,622 - - - 36,622 8 36,630

Translation differences and other movements

- (3) 2,698 - 33 2,728 3,196 5,924

SHAREHOLDERS' EQUITY AT 30 JUNE

20181,296,484 794,674 (56,707) - 13,434 2,047,885 431,444 2,479,329

(2) Dividends include €51.1 million of dividends to R&Co shareholders and a total of €1.2 million of dividends to R&Co Gestion and Rothschild & Co Commandité

SAS. Distributions to non-controlling interests are analysed in note 16.

(3) Consolidated reserves consist of retained earnings of €649.6 million less treasury shares of €16.0 million plus the Group share of net income.

(1) Capital and associated reserves at the period end consist of share capital of €154.9 million and share premium of €1,141.6 million. Share premium, under IFRS

measurement, includes costs incurred in the issuance of share capital.

Consolidated statement of changes in equity for the six months ended 30 June 2018

In thousands of euroUnrealised or deferred capital gains

and losses (net of tax)

Capital and

associated

reserves (1)

Consol-

idated

reserves (3)

Related

to

translation

differences

Fair value

through OCI

Share-

holders’

equity,

Group share

Share-

holders’

equity,

NCI

Total

shareholders'

equity

AFS

reserves

21


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Consolidated profit before tax (I) 261,773 205,632

Depreciation and amortisation expense on tangible fixed assets and intangible fixed assets 13,779 14,319

Impairments and net charge for provisions 1,744 7,739

Remove (income)/loss from associates and long-standing shareholding (6,202) (6,117)

Remove (profit)/loss from disposal of a subsidiary - 358

Remove (profit)/loss from investing activities (74,441) (71,490)

Non-cash items included in pre-tax profit and other adjustments (II) (65,120) (55,191)

Net (advance)/repayment of loans to customers (35,075) (200,422)

Cash (placed)/received through interbank transactions (192,437) 388,814

Increase/(decrease) in due to customers 1,464,986 (71,706)

Net inflow/(outflow) related to derivatives and trading items (34,486) (24,817)

Issuance/(redemption) of debt securities in issue (75,556) (24,469)

Net (purchases)/disposals of assets held for liquidity purposes 80,356 115,737

Other movements in assets and liabilities related to treasury activities 68,503 82,760

Total treasury-related activities 1,311,366 466,319

(Increase)/decrease in working capital (125,541) (202,241)

Tax paid (28,904) (37,530)

Other operating activities (154,445) (239,771)

Net (decrease)/increase in cash related to operating assets and liabilities (III) 1,121,846 26,126

Net cash inflow/(outflow) related to operating and treasury activities (A) = (I) + (II) + (III) 1,318,499 176,567

Purchase of investments (89,235) (76,584)

Purchase of property, plant and equipment and intangible fixed assets (11,729) (12,821)

Total cash invested (100,964) (89,405)

Cash received from investments (disposals and dividends) 120,693 147,804

Cash received from subsidiaries, associates and long-standing shareholding (disposals and dividends) 5,474 5,242

Cash from disposal of property, plant and equipment and intangible fixed assets 97 2,197

Total cash received from investments 126,264 155,243

Net cash inflow/(outflow) related to investing activities (B) 25,300 65,838

Dividends paid to shareholders of parent company (52,255) -

Dividends paid to non-controlling interests (note 16) (156,753) -

Interest paid on perpetual subordinated debt (2,299) (1,839)

(Acquisition)/disposal of own shares and additional interests in subsidiaries (10,571) (14,933)

Net cash inflow/(outflow) related to financing activities (C) (221,878) (16,772)

Impact of exchange rate changes on cash and cash equivalents (D) 19,478 (216,989)

NET INFLOW/(OUTFLOW) OF CASH (A) + (B) + (C) + (D) 1,141,399 8,644

Net opening cash and cash equivalents (note 17) 4,922,107 4,862,319

Net closing cash and cash equivalents (note 17) 6,063,506 4,870,963

NET INFLOW/(OUTFLOW) OF CASH 1,141,399 8,644

Cash flow statementfor the six months ended 30 June 2018

22


01/01/18

30/06/18

(6 months)

01/01/17

30/06/17

(6 months)

+ Net interest income 39,059 37,605

+ Net fee income 880,066 792,553

+/- Net gains/(losses) on financial instruments at fair value through profit or loss 87,599 44,077

+/- Net gains/(losses) on financial assets at fair value through other comprehensive income - -

+/- Net gains/(losses) on derecognition of assets held at amortised cost (145) -

+/- Net gains/(losses) on available-for-sale financial assets - 16,630

+ Other operating income 257 5,494

- Other operating expenses (320) (653)

Net banking income 1,006,516 895,706

- Staff costs (582,469) (496,831)

- Administrative expenses (150,440) (156,365)

- Amortisation, depreciation and impairment of tangible and intangible fixed assets (13,779) (15,558)

Gross operating income 259,828 226,952

+/- Cost of risk 578 (9,551)

Operating income 260,406 217,401

+/- Net income from companies accounted for by the equity method 728 717

+/- Net income/(expense) from other assets 639 7,548


- Income tax expense (36,255) (41,143)

CONSOLIDATED NET INCOME 225,518 184,523

Non-controlling interests (1) 64,457 87,973

NET INCOME - GROUP SHARE 161,061 96,550

Earnings per share in euro - Group share (basic) 2.14 1.31

Earnings per share in euro - Group share (diluted) 2.10 1.28

1.1 Change of financial year end

As reported last year, the Company changed its financial year end from 31 March to 31 December. The period being reported on forthese summary consolidated financial statements is the six months to 30 June 2018.

Notes to the consolidated financial statements 1. Highlights

To aid comparison between reporting periods, further consolidated income statement data is presented below comparing the sixmonths to 30 June 2018 to the six months to 30 June 2017. The data for the six months to 30 June 2017 has been prepared byadding the quarterly income statement for three months ended 31 March 2017 to the quarterly income statement for three monthsended 30 June 2017.

(1) Non-controlling interests include amounts charged of €54.4 million (June 2017: €76.6 million) in respect of preferred shares and €7.4 million

(June 2017: €7.2 million) in respect of perpetual subordinated debt. Note 16 to the consolidated financial statements provides further information

concerning non-controlling interests.

23

In thousands of euro Global

Advisory

Wealth &

Asset

Management

Merchant

Banking

Other

business

and

corporate

centre

Total before

IFRS

reconcil-

iation

IFRS

reconcil-

iation

01/01/18

30/06/18

(6 months)

Net banking income 636,085 261,439 104,973 15,159 1,017,656 (11,140) 1,006,516

Operating expenses (529,515) (217,475) (33,532) (29,638) (810,160) 63,472 (746,688)

Cost of risk - - - - - 578 578

Operating income 106,570 43,964 71,441 (14,479) 207,496 52,910 260,406

Share of profits of associated entities - - - - - 728 728

Non-operating income - - - - - 639 639

Profit before tax 106,570 43,964 71,441 (14,479) 207,496 54,277 261,773


Advisory

Wealth &

Asset

Management

Merchant

Banking

Other

business

and

corporate

centre

Total before

IFRS

reconcil-

iation

IFRS

reconcil-

iation

01/01/17

30/06/17

(6 months)

Net banking income 553,602 253,939 66,905 17,025 891,471 4,235 895,706


Cost of risk - - - - - (9,551) (9,551)



Non-operating income - - - - - 7,548 7,548


The Group has also adopted the accounting standard IFRS 15 Revenue from Contracts with Customers. IFRS 15 has not had asignificant impact on the Group's accounts. Details of the new accounting policy are provided below.

The table below presents a segmental analysis by business line, which has been prepared on the same basis as described in note29 to the consolidated financial statements. The data for six months ended 30 June 2017 has been derived by adding the quarterlyreporting for the three months to 30 June 2017 and the three months to 31 March 2017.

1.2 Adoption of new accounting policies

The Group has adopted the accounting standard IFRS 9 Financial Instruments, which has changed the classification andmeasurement of the Group’s financial assets. Details of the changes are provided below.

24

2. Preparation of the financial statements

2.1 Information regarding the Company

2.2 General principles

On 3 January 2018, the Group acquired an additional 4,049 shares in Martin Maurel Sella Banque Privée SAM, a Monaco subsidiary,for cash of €13.95 million. Following this acquisition, the Group now controls 100% of this subsidiary.

As a result of this unwinding, Edmond de Rothschild will deliver 1.9 million R&Co shares to RHAG as settlement for the difference invalue in respect of the investments in Edmond de Rothschild and in RHAG. R&Co, for its part, will purchase from Edmond deRothschild all of the remaining 2.5 million R&Co shares in its possession for €75 million in cash. The Edmond de Rothschild andR&Co shares were valued on the basis of their market values (respectively CHF 17,000 and €30) in June 2018. Transactions (ofimmaterial amounts) relating to other minority interests will be settled in cash. The cash required for R&Co Group to finance all oftheir transactions comes from existing resources.

In addition, the two groups will unwind all of their cross-shareholdings. These mainly include: 8.4% of the capital of Edmond deRothschild held by RHAG (R&Co's holding company in Switzerland), 9.5% of the capital of RHAG held by Edmond de Rothschild and5.7% of the capital of R&Co held by Edmond de Rothschild.

As part of this agreement, the Edmond de Rothschild Group will continue to develop its business under the Edmond de Rothschildbrand. The R&Co Group will use the name Rothschild & Co, adopted as a company name since 2015. Rothschild Martin Maurel willbe used to identify the private banking and asset management activities of R&Co from France, Belgium and Monaco. Neither groupmay use the name Rothschild on its own in any form whatsoever in the future.

As the transactions were not complete at 30 June 2018, the transactions have not been accounted for in these financial statements.The transactions were completed on 6 August 2018 after all regulatory consents were obtained and other conditions precedentfulfilled.

The notes to the accounts have been prepared having taken into account the understanding, relevance, reliability, comparability andmateriality of the information provided.

The summary consolidated financial statements of Rothschild & Co SCA Group (the Group) for the six months ended 30 June 2018are presented in accordance with IFRS in force at the reporting date, as adopted in the European Union by EC Regulation No.1606/2002. The format used for the summary financial statements is a banking format. It is consistent with Recommendation No.

2017-02 of 2 June 2017 of the French Accounting Standards Authority (Autorité des normes comptables ). The statements cover theperiod from 1 January 2018 to 30 June 2018. The presentation of the comparative data relative to financial year 2017 has not beenmodified and complies with the provisions of ANC Recommendation No. 2013-04 of 7 November 2013.

The summary consolidated accounts were approved by R&Co Gestion SAS, the Managing Partner of R&Co, on 17 September 2018and considered for verification and control purposes by the Supervisory Board on 25 September 2018.

At 30 June 2018, the Group's holding company was R&Co, a French partnership limited by shares (société en commandite par

actions ), headquartered at 23 bis, avenue de Messine, 75008 Paris (Paris Trade and Companies Registry Number 302 519 228).

The Company is listed on the Eurolist market of Euronext Paris (Compartment A).

1.3 Agreement between Rothschild & Co and Edmond de Rothschild

On 29 June 2018 it was announced that R&Co and Edmond de Rothschild had reached an agreement on the use of their respectivebrands.

1.4 Acquisition of minority stake in Martin Maurel Sella

25

3. Adoption of new accounting standards

3.1 Adoption of IFRS 9 Financial Instruments

3.1.1 Implementation of changes to classification and measurements

In thousands of euro Original

classification under

IAS 39

Original carrying

value under IAS 39

New classification

under IFRS 9

New carrying

value under

IFRS 9

Financial assets

Cash and amounts due from central banks Loans and

receivables

3,868,907 Amortised cost 3,868,907

Trading assets FVTPL

(held for trading)

47,977 FVTPL (mandatory) 47,977

Debt and equity securities FVTPL designated 467,178 FVOCI 219,512

Available for sale 1,596,343 Amortised cost 853,218

FVTPL (mandatory) 989,987

Loans and advances to banks Loans and

receivables

1,730,153 Amortised cost 1,730,153

Loans and advances to customers Loans and

receivables

2,989,919 Amortised cost 2,985,179

FVTPL designated 32,859 FVTPL (designated) 32,859

Other financial assets Amortised cost 426,351 Amortised cost 425,144

Total financial assets 11,159,687 11,152,936

Financial liabilities

Financial liabilities at fair value through profit or loss FVTPL 24,823 FVTPL (mandatory) 24,823

Hedging derivatives FVTPL 6,543 FVTPL (mandatory) 6,543

Debt securities in issue Amortised cost 95,561 Amortised cost 95,561

Due to banks and other financial institutions Amortised cost 636,377 Amortised cost 636,377

Customer deposits Amortised cost 7,770,954 Amortised cost 7,770,954

Other financial liabilities Amortised cost 150,100 Amortised cost 150,100

Total financial liabilities 8,684,358 8,684,358

NET FINANCIAL ASSETS 2,475,329 2,468,578

The Group has adopted IFRS 9 with a date of transition of 1 January 2018, which has resulted in changes in accounting policies andadjustments to the amounts previously recognised in the financial statements. The Group did not early adopt any of IFRS 9 in previousperiods.

The adoption of IFRS 9 has resulted in changes in our accounting policy for recognition, classification and measurement of financial assetsand financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financialinstruments such as IFRS 7 Financial Instruments: Disclosures.

As permitted by the transitional provisions of IFRS 9, the Group has elected not to restate comparative figures. Adjustments to the carryingamounts of financial assets at the date of transition have been recognised in the opening retained earnings and other reserves of the currentperiod. The carrying amount of liabilities has not changed. The Group has also elected to continue to apply the hedge accountingrequirements of IAS 39 on adoption of IFRS 9.

Consequently, for notes disclosures, the amendments to IFRS 7 have only been applied to disclosures in the current period. Therefore,disclosures of notes for the comparative period repeat those disclosures made in the prior reporting period.

Set out below are disclosures relating to the impact of the adoption of IFRS 9 on the Group. Further details of the specific IFRS 9 accountingpolicies applied in the current period are described in section 4.4.

The following table shows the original measurement categories in accordance with IAS 39 and the new measurement categories inaccordance with IFRS 9 for the Group's financial assets and liabilities as at 1 January 2018.

26

3.1.2 Reconciliation of balance sheet categories from IAS 39 to IFRS 9


Carrying amount

31 December 2017/

1 January 2018

Of which:

reclassifications

Of which:

remeasurements

Cash and balances with central banks 3,868,907 - -

Loans and advances to banks 1,730,153 - -

Loans and advances to customers

Opening balance under IAS 39 (A) 2,989,919 - -

Remeasurement: ECL allowance (4,740) - (4,740)

Closing balance under IFRS 9 2,985,179 - -

Investment securities - amortised cost

Opening balance under IAS 39 - - -

Add: from AFS debt - within liquidity portfolio (B) 815,991 815,991 -

Remeasurement: ECL allowance (359) - (359)

Add: from AFS debt - securitised vehicle, senior tranches (C) 38,031 38,031 -

Remeasurement: from FV to amortised cost (445) - (445)

Closing balance under IFRS 9 853,218 - -

Other financial assets

Opening balance under IAS 39 426,351 - -

Remeasurement: ECL allowance (1,207) - (1,207)


Total financial assets measured at amortised cost 1 January 2018 9,862,601 854,022 (6,751)

Trading assets 47,977 - -

Loans and advance to customers 32,859 - -

Investment securities - FVTPL (mandatory)


Add: from AFS equity - issued by mutual funds (D) 422,599 422,599 -

Add: from AFS debt investment - securitised vehicle, junior tranches (C) 10,754 10,754 -

Add: from AFS equity - investments (E) 66,897 66,897 -

Add: from AFS debt - not meeting SPPI test (F) 22,559 22,559 -

Add: from designated at FVTPL (IAS 39) - investments (E) 467,178 467,178 -


Investment securities - FVTPL (designated)

Opening balance under IAS 39 467,178 - -

Less: to mandatory FVTPL (IFRS 9) (E) (467,178) (467,178) -

Closing balance under IFRS 9 - - -

Total financial assets measured at FVTPL 1 January 2018 1,070,823 522,809 -

Investment securities - FVOCI (debt instruments)


Add: from AFS - debt where sales are envisaged (H) 99,354 99,354 -


Investment securities - FVOCI (equity instruments)


Add: from AFS strategic equity instrument (G) 120,158 120,158 -


Investment securities - AFS

Opening balance under IAS 39 1,596,343 - -

Less: to amortised cost - debt within liquidity profile (B) (815,991) (815,991) -

Less: to amortised cost - securitised vehicle, senior tranches (C) (38,031) (38,031) -

Less: to mandatory FVTPL (IFRS 9) - issued by mutual funds (D) (422,599) (422,599) -

Less: to mandatory FVTPL (IFRS 9) - securitised vehicle, junior tranches (C) (10,754) (10,754) -

Less: to mandatory FVTPL (IFRS 9) - investments (E) (66,897) (66,897) -

Less: to mandatory FVTPL (IFRS 9) - debt not meeting SPPI test (F) (22,559) (22,559) -

Less: to FVOCI - strategic equity instrument (G) (120,158) (120,158) -

Less: to FVOCI - debt where sales are envisaged (H) (99,354) (99,354) -

Closing balance under IFRS 9 - - -

Total financial assets measured at FVOCI 1 January 2018 219,512 (1,376,831) -

TOTAL FINANCIAL ASSETS 1 JANUARY 2018 11,152,936 - (6,751)

The Group has performed a detailed analysis of its business models for managing financial assets and analysed the characteristics of theircash flows. The following table reconciles the carrying amounts of financial assets from the measurement categories of IAS 39 to themeasurement categories of IFRS 9, upon transition to IFRS 9 on 1 January 2018:

Note 4

27

3.1.2 Reconciliation of balance sheet categories from IAS 39 to IFRS 9 (continued)

3.1.3 Reconciliation of categories of shareholders’ equity from IAS 39 to IFRS 9


Impact of

adopting

IFRS 9 at

1 January 2018

Fair value reserve

Closing balance under IAS 39 (31 December 2017) 32,993

Reneasurement of investment securities (debt) when reclassified from AFS to amortised cost (445)

Reclassification of investment securities (equity and debt) from AFS to FVTPL (12,115)

OPENING BALANCE UNDER IFRS 9 (1 JANUARY 2018) 20,433

Retained earnings

Closing balance under IAS 39 (31 December 2017) 642,543

Reclassification of investment securities (equity and debt) from AFS to FVTPL 12,115

Recognition of expected credit losses under IFRS 9 (6,405)

Tax on the expected credit losses under IFRS 9 2,006

OPENING BALANCE UNDER IFRS 9 (1 JANUARY 2018) 650,259

(D) Equity instruments issued by mutual fundsUnits of mutual funds which qualify as AFS equity under IAS 39 must be measured at FVTPL under IFRS 9, where their value can beredeemed from the issuer of the instrument.

(E) Investment assetsAssets which are held primarily to make valuation gains are classified as fair value through profit or loss. This includes Merchant Bankinginvestments.

(F) Debt securities which fail the SPPI testDebt securities previously held as AFS are classified as FVTPL if they failed to meet the SPPI test.

(G) Designation of equity instruments as FVOCILong-term shareholdings held by the Group for strategic purposes, such as its investment in EdRS, are designated under IFRS 9 as FVOCI,because gains and losses made on these are not considered by management as part of the Group's performance. Under IAS 39, this typeof shareholding was classified as AFS.

(H) Debt securities where the business model includes the possibility of selling the asset Debt securities previously held as AFS are classified as FVOCI if they are held within a business model whose objective is achieved both bycollecting contractual cash flows and by selling the assets.

The following table analyses the impact on reserves and retained earnings, net of tax, of the transition to IFRS 9. The impact affects the fairvalue reserve and retained earnings. There is no impact on other components of equity.

(C) Securitised vehicles Under IAS 39, the Group's investments in securitised vehicles were classified as AFS debt investments. When applying IFRS 9, the Groupmade an assessment of whether the tranches held met the SPPI criteria. A critical point to consider is whether the tranche has a creditrating that is higher than the underlying portfolio of assets. Those which do (generally the senior tranches) can be classified as amortisedcost. Those which do not (generally the junior tranches) must be classified as FVTPL.

(B) Debt securities within the liquidity portfolio Certain highly liquid debt securities are held by the treasury function for a long period of time. These securities may be sold before maturity,but such sales are not expected to be more than infrequent. The Group considers that these securities are held within a business modelwhose objective is to hold assets to collect the contractual cash flows. These assets, which were previously classified as AFS, wereclassified as amortised cost from the date of initial application.

(A) Loans and other receivables Loans and other receivables continue to be classified as amortised cost where allowed under IFRS 9. (see 4.4.1.1 below)

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3.1.4 Reconciliation of impairment allowances from IAS 39 to IFRS 9

In thousands of euro Loan loss

allowance under

IAS 39/

Provision under

IAS 37

Reclassifications Remeasurements Loan loss

allowance under

IFRS 9

Loans and receivables (IAS 39) / financial assets at amortised cost (IFRS 9)

Loans and advances to customers 76,923 - 4,740 81,663

Debt securities - - 359 359

TOTAL 76,923 - 5,099 82,022

AFS financial instruments (IAS 39) / financial assets at FVOCI (IFRS 9)

Debt securities 9,837 (9,837) - -

Equity securities 124,325 (124,325) - -

TOTAL 134,162 (134,162) - -

Other financial assets

Other financial assets 18,272 - 1,207 19,479

TOTAL 18,272 - 1,207 19,479

Loan commitments and financial guarantee contracts

Loan commitments 995 - 99 1,094

TOTAL 995 - 99 1,094

3.2 Adoption of IFRS 15 Revenue from Contracts with Customers

In assessing the impact of adopting IFRS 15, the Group has considered Global Advisory to be the line of business most likely to be affectedby the new standard. Our assessment reviewed all material GA fees to see whether any would have been recognised differently under IFRS15. The differences identified last year between revenue recognition under IFRS 15 and IAS 18, the previous standard, were immaterial.

IFRS 15 Revenue from Contracts with Customers replaced the current standards and interpretations on revenue recognition. The Group hasadopted IFRS 15 using the cumulative effect method, which means that any changes prior to adoption on 1 January 2018 are made inopening equity, and comparatives are not restated.

Further information on the measurement of impairment allowance under IFRS 9 can be found in “Expected Credit Loss Measurement”(section 5.2.2.3).

The following table reconciles the impairment allowances at 31 December 2017, measured in accordance with the incurred loss model ofIAS 39, to the impairment allowance at 1 January 2018, measured in accordance with the expected loss model of IFRS 9:

Loss allowances for AFS assets are no longer recorded once the asset is reclassified as FVTPL or as equity at FVOCI.

The new IFRS 15 accounting policies applied in the current period are described in section 4.4.2.

29

4. Accounting principles and valuation methods

4.3 Future standards and interpretations

Changes to the Group's financial reporting for future accounting periods are expected as a result of amended or new accountingstandards and interpretations from the IASB.

The main standard expected to affect the Group is IFRS 16 Leases. A description of the likely effect was provided in the financialstatements for the period ended 31 December 2017, and the assessment is not significantly different now.

4.1 Basics of accounting

Except for the "Changes in significant accounting policies", described below, the accounting principles and valuation methods applied bythe Group for the half-year summary consolidated financial statements are the same as those applied and described in the financialstatements for the period ended 31 December 2017. It should be noted that the Group's interim financial reporting is in compliance withIAS 34.

This is the first set of the Group’s financial statements where IFRS 9 and IFRS 15 have been applied.

The Group has not opted for early application of new standards, amendments and interpretations adopted by the European Union or theIASB where the application in 2018 is optional.

4.2 Accounting judgements and estimates

To prepare the financial statements in accordance with the Group’s accounting methods, management has made assumptions andestimates that could have an impact on the book value of certain assets and liabilities and items of income and expense. By their nature,such valuations carry risks and uncertainties as to their realisation in the future. Management has taken care to consider a counterparty’s financial situation and outlook as well as multiple-criteria valuations that take observable parameters into account to determine whetherthere are objective signs of impairment.

Estimates and assumptions are used mainly with regard to bonus accruals, goodwill, securities at FVOCI, FVTPL financial assets,impairments of assets at amortised cost, and provisions.

Following the adoption of IFRS 9, the Group has assessed the business model within which the assets are held and has assessedwhether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding.

At each closing date, the Group draws conclusions from past experience and all relevant factors relating to its business.

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4.4 Changes in significant accounting policies

4.4.1 IFRS 9 Financial Instruments

4.4.1.1 IFRS 9: Classification and measurement

- the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

- the contractual terms of the financial asset give rise on specified date to cash flows that are solely payments of principal andinterest on the principal amount outstanding.

-the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and sellingfinancial assets; and

- the contractual terms of the financial asset give rise on specified date to cash flows that are solely payments of principal andinterest on the principal amount outstanding.

The changes described below in accounting policies are also expected to be reflected in the Group’s consolidated financialstatements as at and for the year ending 31 December 2018.

The Group has adopted IFRS 9 Financial Instruments (see 4.4.1) and IFRS 15 Revenue from Contracts with Customers (see 4.4.2)for the first time from 1 January 2018.

The effect of initially applying these standards is mainly attributed to the following:- a change of the asset classification (see 4.4.1.1)- an increase in impairment losses recognised on financial assets (see 4.4.1.2)

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as FVTPL:

On initial recognition of an equity instrument that is not held for trading, the Group may irrevocably elect to present subsequentchanges in OCI. This election is made on an investment-by-investment basis. From 1 January 2018 any cumulative gain/lossrecognised in OCI in respect of equity investment securities designated as at FVOCI is not recognised in profit or loss onderecognition of such securities.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)

Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenueand foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financialasset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss andrecognised in net banking income. Interest income from these financial assets is included in "interest income" using the effectiveinterest method.

These financial assets are recognised at fair value, with transaction costs recorded immediately in the income statement, and theyare subsequently measured at fair value. Gains and losses arising from changes in fair value, or on derecognition, are recognised inthe income statement as net gains or losses on financial assets at fair value through profit or loss. Interest and dividend income fromfinancial assets at fair value through profit or loss is recognised in net gains or losses on financial assets at fair value through profitor loss.

On initial recognition, a financial asset is classified as measured at amortised cost, FVOCI or FVTPL.

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (FVOCI)

FINANCIAL ASSETS AT AMORTISED COST

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as FVTPL:

The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured as described insection 4.4.1.2 IFRS 9: Impairment. Interest income from these financial assets is included in "Interest and similar income" using theeffective interest method.

Financial assets that meet the criteria for the classification of amortised cost or FVOCI, but which are managed, and whoseperformance is evaluated, on a fair value basis, are measured at FVTPL on a designated basis.

Financial assets that do not meet the criteria for the classification of amortised cost or FVOCI are measured at FVTPL on amandatory basis.

31

- features that modify consideration of the time value of money (e.g. periodical reset of interest rates).

- terms that limit the Group's claim to cash flows from specified assets (e.g. non-recourse asset arrangements); and

- loan commitments issued.

The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as12-month ECL:

- debt securities that are determined to have low credit risk at the reporting date; and

- other financial instruments (other than accounts receivable) on which credit risk has not increased significantly since their initialrecognition.

For the accounts receivable, the Group uses the “simplified” approach, under which impairments are calculated as lifetime expectedcredit losses at initial recognition, regardless of any changes in the counterparty’s credit risk.

12-month ECL is the portion of ECL that results from default events on a financial instrument that are possible within the 12 monthsafter the reporting date.

ASSESSMENT WHETHER CONTRACTUAL CASH FLOWS ARE SOLELY PAYMENTS OF PRINCIPAL ANDINTEREST (SPPI)

- leverage features;

Financial assets that are held for trading or managed on a fair value basis are measured at FVTPL.

RECLASSIFICATIONS

Financial assets are not reclassified subsequent to their initial recognition, except when the Group changes its business model formanaging financial assets.

4.4.1.2 IFRS 9: Impairment

The Group recognises loss allowances for ECL on the following financial instruments that are not measured at FVTPL:

- loans, advances and debt securities;

- accounts receivable;

- financial guarantee contracts issued; and

No impairment loss is recognised on equity investments as required by IFRS 9.

For the purposes of this assessment "principal" is defined as the fair value of the financial asset on initial recognition. "Interest" isdefined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during aparticular period of time and for other basic lending risks and costs, as well as profit margin.

In assessing whether the contractual cash flows are SPPI, the Group considers the contractual terms of the instrument. This includesassessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flowssuch that it would not meet this condition. In making the assessment, the Group considers:

- contingent events that would change the amounts and timing of cash flows;

- prepayment and extensions terms;

- the risks that affect the performance of the business model and how those risks are managed;

- how managers of the business are compensated, e.g. whether compensation is based on the fair value of the assets managed orthe contractual cash flows collected; and

BUSINESS MODEL ASSESSMENT

The Group makes an assessment of the business model in which an asset is held at portfolio level because this best reflects the waythe business is managed and information is provided to management. The information considered includes:

- the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, the Group considerswhether management's strategy focuses on earning interest revenue, maintaining a particular interest profile, matching the durationof the financial assets to the duration of the liabilities that are funding those assets; or realising cash flows through the sale of theassets;

- how the performance of the portfolio is evaluated and reported to the Group's management;

- the frequency, volume and timing of sales in prior periods, the reason for such sales and its expectations about future sales activity.However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Group'sstated objective for managing the financial assets is achieved and how cash flows are realised.

32

- loan commitments and financial guarantee contracts: as a provision; and

- debt instruments measured at FVOCI: no loss allowance is recognised in the balance sheet because the carrying amount of theseassets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve.

PRESENTATION OF ALLOWANCE FOR ECL IN THE BALANCE SHEET

- granting to the borrower, for economic or legal reasons relating to its financial difficulty, a concession that the lender would nototherwise consider;

- it becoming probable that the borrower will enter bankruptcy or other financial reorganisation.

ECL is a probability-weighted estimate of credit losses. It is measured as follows:

- financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the differencebetween the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive);

- financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the presentvalue of estimated future cash flows;

- undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Group ifthe commitment is drawn down and the cash flows that the Group expects to receive; and

- financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group expects to recover.

More detail on the methodology used to determine the ECL is given in section 5.2.2.

EXPECTED CREDIT LOSS MEASUREMENT

Objective evidence that a financial asset or group of assets is credit impaired includes the following observable data:

- significant financial difficulty of the issuer;

Loss allowances for ECL are presented in the balance sheet as follows:

CREDIT-IMPAIRED ASSETS

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt instruments at FVOCI arecredit impaired. When an asset is considered as credit impaired, it is also considered to be in default. A financial asset is creditimpaired when one or more events that have a detrimental impact on the estimated cash flows of the financial assets have occurred.

- financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;

- a breach of contract, such as a default or delinquency in repayment of interest or principal;

A loan that has been renegotiated due to a deterioration in the borrower's condition is usually considered to be credit-impaired unlessthere is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators ofimpairment. In addition, a retail loan that is overdue for 90 days or more is considered impaired.

WRITE-OFF

The Group writes off financial assets (either partially or in full) when there is no realistic prospect of recovery. This is generally thecase when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flowsto repay the amounts subject to the write-off.

33

4.4.2 IFRS 15 Revenue from Contracts with Customers

Fees and commissions that are an integral part of a loan, and loan commitment fees for loans that are likely to be drawn down, aredeferred (together with related direct costs) and recognised over the life of the loan as an adjustment to the effective interest rate.

Costs can sometimes be charged to the client in the course of a mandate. Where recoverable, these are recognised as a receivablerather than revenue.

With effect from 1 January 2018, the Group adopted IFRS 15 Revenue from Contracts with Customers, replacing IAS 18 Revenue.

The Group earns fee and commission income from a range of services it provides to clients. Under IFRS 15, revenue is recognisedwhen a customer obtains control of the service. Fee income generated by the Group can be categorised into the two broadcategories below, depending upon the timing of the relevant service.

SERVICES PROVIDED OVER TIME

These are fees earned from services that are provided over a period of time. Examples in the WAM business include asset management fees related to investment funds as well as income from wealth management, financial planning and custody services that are continuously provided over an extended period of time. For GA, these services include advisory services paid upfront or on a retainer basis. Revenue is recognised over the period in which the services are provided, once one of the following occurs:

i) The customer consumes the benefits provided by the Group and another entity would not need to substantially re-perform the work that the Group has completed to date; or

ii) The Group has an enforceable right to payment for performance completed to date.

POINT IN TIME SERVICES

These fees are earned from providing services for which revenue is earned only when the service has been completed i.e. once a performance obligation has been satisfied. Examples include a payment for advisory services that will only be made after the successful completion of a mandate. Revenue is recognised when it is highly probable that there will not be a significant reversal of the revenue in future.

The amount of fee and commission income is based on consideration specified in a legally enforceable contract. The revenuerecognised for each mandated service represents a market price, and consideration received is allocated to the separatelyidentifiable performance obligations in a contract.

34

5. Financial risk management

5.1 Governance

5.2 Credit risk

5.2.1 Credit rating

Category DefinitionMapping to IFRS

9 three-stage

model for

impairment

(see 5.2.2)

Category 1 Exposures which are considered to be fully performing. Stage 1

Category 2 Exposures where the payment of interest or principal is not currently in doubt, but whichrequire closer observation than usual, due perhaps to some deterioration in the position ofthe client. Examples include: poor trading results; difficult conditions in the client’s marketsector; competitive or regulatory threats; or the potential impact from currency or otherfactors.

Unimpaired GA receivables which are past due over 90 days are included in this category.

Stage 2

Category 3 Exposures where there has been further deterioration in the position of the client comparedto Category 2. Although the exposure is not considered to be impaired, the relationshiprequires close monitoring by the front office team.

Stage 2

Category 4 Exposures that are considered to be impaired and which carry a provision against part of theloan (unless collateral exists which exceeds the exposure's carrying value). At least somerecovery is expected to be made.

Stage 3

Category 5 Exposures that are considered to be impaired and which carry a full provision. No significantrecovery of value is expected.

Stage 3

Credit risk is the risk of suffering financial loss, should any of the Group's customers, clients or market counterparties fail to fulfilltheir contractual obligations to the Group.

All Group companies map their own credit monitoring to these categories for the purposes of Group reporting.

The Group reviews credit exposures on financial assets on a quarterly basis and for this purpose they are classified as follows:

The Group's governance environment is described in the annual report for the period ended 31 December 2017, and is substantiallyunchanged at 30 June 2018.

35

In millions of euro Category 1 Category 2 Category 3 Category 4 Category 5 Impairment

allowance30/06/2018

Cash and amounts due from central banks 4,859.5 - - - - - 4,859.5

Financial assets at fair value through profit or loss 106.5 - - - - - 106.5

Loans and advances to banks 1,939.0 - - - - - 1,939.0

Loans and advances to customers 2,914.3 51.2 44.1 86.6 15.4 (79.3) 3,032.3

Debt securities at FVOCI 137.5 - - - - - 137.5

Debt at amortised cost 761.8 - - - - (0.3) 761.5

Other financial assets 328.4 52.5 - 10.3 11.6 (18.4) 384.4

Subtotal assets 11,047.0 103.7 44.1 96.9 27.0 (98.0) 11,220.7

Commitments and guarantees 495.1 - 0.3 0.8 - n/a 496.2

TOTAL 11,542.1 103.7 44.4 97.7 27.0 (98.0) 11,716.9

In millions of euro Category 1 Category 2 Category 3 Category 4 Category 5 Impairment

allowance31/12/2017

Cash and amounts due from central banks 3,868.9 - - - - - 3,868.9

Financial assets at fair value through profit or loss 50.2 - - - - - 50.2

Loans and advances to banks 1,730.2 - - - - - 1,730.2

Loans and advances to customers 2,855.2 33.1 34.2 128.3 16.0 (76.9) 2,989.9

Available-for-sale debt securities 985.2 - - 2.0 9.3 (9.8) 986.7

Other financial assets 387.1 34.3 - 10.6 10.1 (15.7) 426.4

Subtotal assets 9,876.8 67.4 34.2 140.9 35.4 (102.4) 10,052.3

Commitments and guarantees 563.6 - 0.3 - - n/a 563.9

TOTAL 10,440.4 67.4 34.5 140.9 35.4 (102.4) 10,616.2

The tables below disclose the maximum exposure to credit risk at 30 June 2018 and at 31 December 2017 for financial assets withexposure to credit risk, without taking account of collateral held or other credit risk mitigation.

Credit risk on financial assets at fair value through profit or loss is not measured on equity instruments. Allowances against commitmentsand guarantees are booked in "Provisions" (note 12).

36

5.2.2 Expected credit loss

5.2.2.1 Significant increase in credit risk (SICR)

5.2.2.2 Definition of default and credit impaired assets

5.2.2.3 Measuring ECL – explanations of inputs, assumptions and estimation techniques

IFRS 9 outlines a three-stage model for impairment based on changes in credit quality since initial recognition, as summarised below:

Expected credit losses = Probability of Default (PD) x Exposure at Default (EAD) x Loss Given Default (LGD)

The PD represents the likelihood of a borrower defaulting on its financial obligation (based on the definition of default in our accountingprinciples), either over the next 12 months (12m PD), or over the remaining lifetime (lifetime PD) of the obligation.

Credit-impaired assets and assets that have defaulted are described in “Changes in significant accounting policies”, section 4.4.1. Afinancial asset that is classified as impaired has a credit rating of Category 4 or 5.

- A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1.

- If a significant increase in credit risk (SICR) since initial recognition is identified, the financial instrument is moved to Stage 2 but is not yetdeemed to be credit impaired. See section 5.2.2.1 for a description of how the Group determines when a SICR has occurred.

- If the financial instrument is credit-impaired, the financial instrument is then moved to Stage 3.

- Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected credit losses that resultfrom default events possible within the next 12 months. Instruments in Stages 2 or 3 have their ECL measured based on expected creditlosses on a lifetime basis. See section 5.2.2.3 for a description of inputs, assumptions and estimation techniques used in measuring theECL.

- Purchased or originated credit-impaired (POCI) financial assets are those financial assets that are credit impaired on initial recognition.Their ECL is always measured on a lifetime basis (Stage 3).

The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are disclosed below.

When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Groupconsiders reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitativeand qualitative information and analysis, which are based on the Group's credit risk management process. The Group has decided thatSICR is indicated if the relevant credit committee decides that the credit rating of a financial asset is Category 2 or 3.

Financial instruments are often considered to have experienced a significant increase in credit risk if the borrower is more than 30 dayspast due on its contractual payments. For fee income receivable by the GA business, the Group has rebutted this presumption and itconsiders that a significant increase is experienced only after 90 days past due. This rebuttal is based on historical experience of paymentsand is in line with the internal provisioning process (more detail is in section 5.2.2.4).

The Group has not used the low credit risk exemption for any financial instruments in the period.

The Expected Credit Loss (ECL) is measured on either a 12-month (12m) or lifetime basis depending on whether a significant increase incredit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. Expected credit losses are thediscounted product of the following factors:

The EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12m EAD) or over theremaining lifetime (lifetime EAD). The Group derives the EAD from the current exposure to the counterparty.

LGD is the percentage of the likely loss if there is a default. The Group estimates LGD parameters informed by historical recovery rates ofclaims against defaulted counterparties. The LGD models consider the structure, collateral and recovery cost of any collateral that isprovided to secure the financial asset. For loans secured by property, LTV ratios are a key parameter in determining LGD.

These parameters are generally derived from internally developed models and other historical data.

37

5.2.2.4 Grouping of instruments for losses measured on a collective basis

For expected credit loss provisions calculated on a collective basis, a grouping of exposures is performed on the basis of riskcharacteristics that are shared by exposures.

There have been no significant changes in estimation techniques or significant assumptions made during the reporting period.

PCL LOMBARD AND MORTGAGE LOANS

The Group has a history of very low defaults on its Lombard and mortgage loans made by PCL and the PD and the LGD have beendetermined by the history of observed defaults alongside realistic downside scenarios based on management assessment.

DEBT AT AMORTISED COST

For the Lombard loans, the LGD is estimated based on the amount of collateral held, and whether it is diversified or not, as well as natureof the client and the potential difficulties of recovering the value of the collateral.

Lending by the R&Co Group is primarily focused on supporting the WAM business by way of lending to private clients, either by way ofmortgages against residential properties or against portfolios of securities (Lombard lending). In addition, following the recent merger withBanque Martin Maurel, there is a portfolio of corporate loans which includes some sector specialisations (this equates to approximately€0.3 billion of the total). The UK commercial legacy book continues to run off and is now down to less than €100 million.

The majority of the private client loan books are secured and there is no historical loss data for these. Nevertheless, we have adopted aconservative approach to measuring losses on a collective basis for these loans, based on assumptions of PD and LGD for different loantypes. The approach for the remaining book, which generally comprises a larger number of smaller loans, does have some loss data, andthis has been factored into the IFRS 9 calculations.

For the mortgages loans, the LGD is estimated considering the value of the properties which are mortgaged, and varies based on the LTV;the amount of costs likely to be incurred in recovering and realising any collateral; the nature of the client; and the potential difficulties ofrecovering the value of the collateral.

For debt securities in the Treasury portfolio, S&P credit ratings are used to determine the ECL. These published ratings are continuouslymonitored and updated. The 12m and lifetime PDs associated with each rating are determined based on realised default rates publishedby S&P. To estimate the LGD, the Group has used the Basel III LGD, which is 45% for senior debt.

The assumptions underlying the ECL calculation are monitored and reviewed on a quarterly basis.

38

5.2.3 Credit risk exposure

5.2.3.1 Maximum exposure to credit risk – financial instruments subject to impairment

Gross carrying amounts

Loans and advances to banks 1,939.0 - - 1,939.0

PCL loans to customers 2,471.1 15.5 - 2,486.6

Other loans to customers 443.2 79.8 102.0 625.0

FVOCI debt securities 137.5 - - 137.5

Securities at amortised cost 761.8 - - 761.8

5,752.6 95.3 102.0 5,949.9

Loss allowance

Loans and advances to banks - - - -

PCL loans to customers (1.3) (0.0) - (1.3)

Other loans to customers (2.4) (12.5) (63.1) (78.0)

FVOCI debt securities - - - -

Securities at amortised cost (0.3) - - (0.3)

(4.0) (12.5) (63.1) (79.6)

Net carrying amount

Loans and advances to banks 1,939.0 - - 1,939.0

PCL loans to customers 2,469.8 15.5 - 2,485.3

Other loans to customers 440.8 67.3 38.9 547.0

FVOCI debt securities 137.5 - - 137.5

Securities at amortised cost 761.5 - - 761.5

5,748.6 82.8 38.9 5,870.3

TOTAL

TOTAL

Information on how the ECL is measured and how the three stages above are determined is provided in "Expected credit lossmeasurement", in section 4.4.1.2.

The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. Thegross carrying amount of financial assets below also represents the Group's maximum exposure to credit risk on these assets. The creditrisk exposure of other financial assets is shown in section 5.2.4.

In millions of euro Stage 1

12 month ECL

Stage 2

Lifetime ECL

Stage 3

Lifetime ECL

TOTAL

TOTAL

39

Loans to customers

Loss allowance at beginning of period (31 December 2017) - (13.9) (63.1) (77.0)

Movements with P&L impact

Transfers

Transfers to Stage 1 - - - -

Transfers to Stage 2 - - - -

Transfers to Stage 3 - 1.0 (1.0) -

(Charge) - - (7.3) (7.3)

Release 1.0 0.4 7.9 9.3

Total net P&L (charge)/release during the period 1.0 1.4 (0.4) 2.0

Movements with no P&L impact

IFRS 9 first time application (4.7) - - (4.7)

Written off - - 0.5 0.5

Exchange - - (0.1) (0.1)

LOSS ALLOWANCE AT END OF PERIOD (30 JUNE 2018) (3.7) (12.5) (63.1) (79.3)

Loans to customers which are past due

In millions of euro30/06/2018 31/12/2017

Less than 30 days past due 112.9 160.5

Between 30 and 90 days past due 49.9 55.4

Over 90 days past due 26.1 31.0

TOTAL 188.9 246.9

For loans to customers, the movement in the loss allowance is provided in the table below. Additionally, the movement in other lossallowances is shown in "Impairments" (note 13).

No loans have been classified as purchased or originated credit-impaired (POCI) assets. The changes in the gross amounts of loans to customers decreased the Stage 1 allowance by €0.8 million and the Stage 2 allowance by€0.4 million in the period. These are mostly due to movements in the past due loans, as shown below:

Stage 1

12 month ECL

Stage 2

Lifetime ECL

Stage 3

Lifetime ECL

TOTAL

In millions of euro

40

5.2.3.2 Collateral

Tangible assets collateral

Financial assets collateral

TOTAL

Gross value of loans

Impairment

Net value of loans

% of Stage 3 / individually impaired loans covered by collateral

5.2.3.3 Modification of financial assets

The Group holds collateral against loans to customers, as substantially all third party commercial lending is secured. The majority ofcollateral is in the form of charges over property assets, or over marketable securities (Lombard lending). There is a realistic possibility, ifnecessary, of both taking possession of, and realising, the collateral.

Stage 1 and 2 loans (Categories 1 to 3) are usually covered by collateral. For Category 1, 2 and 3 loans the level of collateral at exit isexpected to be sufficient to cover the balance sheet exposure. Where a loan is deemed to be impaired (Categories 4 and 5), the level ofthe impairment charge is primarily driven by any expected shortfall in the collateral value, though it is also influenced by the ability of theborrower to service the debt.

Collateral is valued independently at the time the loan is made and periodically thereafter on a rolling basis. Management is able to rollforward a valuation for reporting purposes via a combination of specific knowledge of the collateral and the application of general indices.

The table below gives an estimate of the fair value of collateral held by the Group as security against its loans to customers that are creditimpaired. For each loan, the value of disclosed collateral is capped to the nominal amount less provision of the loan that it is held against,and the comparatives have been restated to be in line with this revised disclosure.

In millions of euro

Where refinancing and sale options are difficult, it is generally in the lender’s and borrower’s interest to extend certain facilities at maturityand not to foreclose on the security. This assumes there are no underlying issues regarding the borrower’s ability to continue to service theloan and the level of collateral is expected to be of sufficient quality to secure the principal.

Unimpaired loans extended in this manner are not categorised as either past due or as renegotiated. As at 30 June 2018 the cumulativevalue of all loans within this category was €2.8 million (31 December 2017: €3.1 million). All of these loans were property loans.

Some loans were renegotiated on substantially different terms than before. Typically these loans will include revised covenants and highermargins to reflect higher credit risk as well as having extended maturities. If these loans had not been renegotiated, they would have beendeemed to have been impaired. As at 30 June 2018, the carrying value of all loans renegotiated was €0.3 million (31 December 2017: €0.6million).

93% 95%

(57.1)

87.2

30/06/2018

Stage 3

loans

26.0

10.3

36.3

102.0

(63.1)

38.9

31/12/2017

Individually

impaired

77.7

5.3

83.0

144.3

41

5.2.4 Credit risk management of other financial assets

In millions of euro % total

gross

exposure

Gross

carrying

amount

Lifetime

ECL

Not impaired

Current to 90 days past due 82% 328.4 -

90-180 days past due 10% 38.7 (0.4)

180 days - 1 year past due 1% 5.2 (0.2)

more than one year past due 2% 8.6 (0.8)

Impaired

Partially impaired 3% 10.3 (5.4)

Fully impaired 3% 11.6 (11.6)

TOTAL 100% 402.8 (18.4)

Other financial assets mainly contain trade receivables from the GA and WAM businesses. For these assets, the Group applies a simplifiedapproach to the calculation of impairments. This means that the loss allowance is always measured at an amount equal to the asset'slifetime ECL. Therefore, the concept of significant increase in credit risk is not applicable to these assets. Fee income is widespread interms of location and of sector and concentration risk is not significant.

The Group considers a receivable to be in default when the borrower is unlikely to pay the Group in full. For each GA office, a quarterlyreview of the outstanding receivables over 90 days is conducted by local management and the GA Global Finance Director. This reviewdetermines if the receivable should be impaired and ensures that impairments are made, or not made, consistently around the Group.

The table below shows the ageing of other financial assets and the associated provisions as at 30 June 2018:

Management has reviewed historical payment behaviour and believes on this basis that receivables less than 90 days overdue have animmaterial risk of not being recoverable in full. These receivables are therefore classified as Category 1 in our internal credit risk table.Management considers that all individual unimpaired receivables over 90 days past due merit assessment for potential credit losses, inaddition to more recent debts which are known to have credit issues. These receivables are considered to be on a watchlist. Where theseare not impaired, management provides a percentage of all these assets to reflect losses that might be expected to eventually arise. Theprovision percentage takes account of both historical experience and management assessment of future potential losses.

The loss allowance movement is described in "Impairments" (note 13).

Credit risk category

classification

Category 1

Category 2

Category 2

Category 2

Category 4

Category 5

42

5.2.5 Further credit risk analysis

5.2.5.1 Credit risk by location

Cash and amounts due from central banks 1,809.2 3,046.3 - 4.0 - - - 4,859.5

Financial assets at fair value through profit

or loss (1) 43.2 6.1 12.5 34.1 1.9 4.8 3.9 106.5

Loans and advances to banks 974.7 58.0 418.3 222.8 219.0 33.3 12.9 1,939.0

Loans and advances to customers 1,559.5 116.5 612.5 450.8 144.0 86.9 62.1 3,032.3

Debt securities at FVOCI - - 135.5 1.9 - 0.1 - 137.5

Debt at amortised cost 279.7 - 18.4 376.5 85.9 1.0 - 761.5

Other financial assets 115.0 8.6 95.0 78.2 48.4 12.3 26.9 384.4

Subtotal assets 4,781.3 3,235.5 1,292.2 1,168.3 499.2 138.4 105.8 11,220.7

Commitments and guarantees 350.5 - 65.8 67.6 5.8 - 6.5 496.2

TOTAL 5,131.8 3,235.5 1,358.0 1,235.9 505.0 138.4 112.3 11,716.9

(1) Excluding equity.

Cash and amounts due from central banks 1,206.9 2,658.6 - 3.4 - - - 3,868.9

Financial assets at fair value through profit

or loss (1) 18.9 9.3 5.2 15.5 0.5 0.7 0.1 50.2

Loans and advances to banks 657.5 50.9 342.8 328.6 313.0 22.8 14.6 1,730.2

Loans and advances to customers 1,514.9 115.9 795.2 264.9 158.8 78.6 61.6 2,989.9

Available-for-sale debt securities 306.3 - 147.8 422.2 100.0 9.4 1.0 986.7

Other financial assets 138.8 25.5 62.5 102.4 63.3 24.2 9.7 426.4

Subtotal assets 3,843.3 2,860.2 1,353.5 1,137.0 635.6 135.7 87.0 10,052.3

Commitments and guarantees 321.3 48.5 82.5 98.1 0.1 11.4 2.0 563.9

TOTAL 4,164.6 2,908.7 1,436.0 1,235.1 635.7 147.1 89.0 10,616.2

(1) Excluding equity.

Location for loans and advances is measured by reference to the location of the borrower. Debt securities are recorded based on thelocation of the issuer of the security.

The tables below show an analysis of credit risk by location and by sector as at 30 June 2018 and 31 December 2017.

31/12/2017

Other 30/06/2018

In millions of euro France Switzer-

land

UK and

Channel

Islands

Rest of

Europe

Americas Australia

and Asia

Other

Switzer-

land

UK and

Channel

Islands

Rest of

Europe

AmericasIn millions of euro France Australia

and Asia

43

5.2.5.2 Credit risk by sector

In millions of euro 30/06/2018 % 31/12/2017 %

Cash and amounts due from central banks 4,859.5 42% 3,868.9 36%

Households 2,633.5 23% 2,434.8 23%

Credit institutions 2,050.3 17% 1,800.6 17%

Liquid debt securities (diversified sectors) 761.5 6% 825.1 8%

Real estate 412.5 4% 374.6 4%

Short-term fee income receivable (diversified customers) 324.2 3% 331.9 3%

Other financial corporations 258.3 2% 283.1 3%

Government(1) 135.6 1% 112.3 1%

Other 281.5 2% 584.9 6%

TOTAL 11,716.9 100% 10,616.2 100%

5.3 Market risk

5.3.1 Equity investments

In millions of euro 30/06/2018 % 31/12/2017 %

France 339.3 30% 359.6 32%

Rest of Europe 271.6 24% 222.4 20%

United Kingdom and Channel Islands 202.3 18% 197.1 18%

Americas 124.9 11% 115.3 10%

Switzerland 113.3 10% 122.9 11%

Australia and Asia 48.6 4% 55.3 5%

Other 33.7 3% 34.3 4%

TOTAL 1,133.7 100% 1,106.9 100%

The table below shows the Group’s equity price risk in relation to these instruments, by location. The comparative figures for December2017 have been reassigned, following a change in the current period in the way that equity price risk is allocated to different locations.

Market risks associated with treasury and equity positions are described below with a description of the levels of risk. Management ofmarket risk is described in the annual report for the period ended 31 December 2017, and is substantially unchanged at 30 June 2018.

(1)The "Government" exposure predominantly consists of high-quality government securities.

The sectors above are based on NACE classification codes ("Nomenclature of Economic Activities"), and other categories used forFINREP regulatory reporting.

Short-term accounts receivable and highly liquid debt securities held for treasury management are exposed to various diversifiedsectors. Any temporary exposure to these sectors is not thought by management to pose a significant sectoral risk, and is not expectedto be indicative of sectoral concentration for these assets in future. Therefore, these exposures are not analysed further in this section.

The Group has exposure to equity price risk through holdings of equity investments. Each of these positions is individually approved bymanagement and is monitored on an individual basis.

If the price of these equities were to fall by 5% at 30 June 2018, then there would be a post-tax charge to the income statement of€41.6 million (31 December 2017: €24.2 million) and a reduction in equity of €5.5 million (31 December 2017: €21.3 million). UnderIFRS 9, the charge through P&L is higher because more of the equities are measured at FVTPL.

Moreover, the Group is exposed through its investments to the risks affecting the companies in which it invests.

44

5.4.1 Liquidity

The Group's three main banking groups each manage their own liquidity independently of each other. An illustration of how theymanage their short-term liquidity is summarised below, together with a measure of their liquidity coverage ratio (LCR). The LCR is aratio of highly liquid assets to short-term obligations.The figures below are taken from our regulatory returns but are not audited.

Rothschild Bank AG Zurich

RBZ's liquidity policy includes a behavioural adjustment applied across different client types, which allows for approximately one third ofclient deposits to be withdrawn over 30 days. Although the regulatory framework would permit significant mismatches within the 30-daytime bucket, RBZ maintains a more conservative approach to liquidity.

Internal limits provide for RBZ to be cumulatively cash positive in all periods (after behavioural adjustments). The behaviouraladjustments are complemented by an additional requirement that 20% of all client call deposits are held in cash and assets realisablewithin 48 hours.

Rothschild Bank International Limited

In order to comply with the liquidity regime set by the Guernsey Financial Services Commission (the GFSC), RBI manages liquidity toensure that a conservative position is maintained at all times by holding significant stock of High Quality Liquid Assets (HQLA), thecriteria of such assets being set by the GFSC. Exposure to liquidity risk is considered to be low and is monitored on a daily basisindependently of the front office with a mandatory submission made to the regulator on a monthly basis.

RBZ’s LCR at 30 June 2018 was 146%, as measured for regulatory purposes (31 December 2017: 153%). The regulatory limit is 90%.

Rothschild Martin Maurel

RMM maintains a stable and diverse pool of customer deposits with a low customer loan-to-deposit ratio. Treasury manages liquidity toensure that a conservative position is maintained at all times by holding a significant amount of short-term liquidity with the Central Bankand other banks alongside a portfolio of highly rated securities. Exposure to liquidity risk is considered to be very low and is monitoredon a daily basis independently of the front office.

At 30 June 2018, RMM’s LCR was 229% (31 December 2017: 205%). The regulatory limit is 90%.

5.4 Liquidity risk

Liquidity risk arises from the mismatch between the legal maturity of assets and liabilities. Management of liquidity risk is described inthe annual report for the period ended 31 December 2017, and is substantially unchanged at 30 June 2018.

At 30 June 2018 RBI's LCR was 210% (31 December 2017: 186%). The regulatory limit is 100%.

45

In millions of euro Demand-

1m

1m-3m 3m-1yr 1yr-2yr 2yr-5yr >5 yr No

contractual

maturity

30/06/2018

Cash and balances at central banks 4,859.5 - - - - - - 4,859.5

Financial assets at FVTPL 453.4 7.6 44.2 0.7 227.8 204.5 190.0 1,128.2

Financial assets at FVOCI - 71.8 64.0 - - 1.7 112.0 249.5

Securities at amortised cost 20.6 62.6 366.4 168.3 105.0 38.6 - 761.5

Loans and advances to banks 1,312.5 369.4 256.4 - 0.7 - - 1,939.0

Loans and advances to customers 1,037.2 268.1 501.1 259.6 490.1 476.2 - 3,032.3

Other financial assets 319.0 53.8 11.3 0.3 - - - 384.4

TOTAL 8,002.2 833.3 1,243.4 428.9 823.6 721.0 302.0 12,354.4

Financial liabilities at FVTPL 13.2 3.1 3.7 - - - - 20.0

Hedging derivatives - - - - 6.0 - - 6.0

Due to banks and other financial institutions 192.8 0.3 6.7 66.6 73.6 162.1 - 502.1

Due to customers 8,973.1 165.5 75.7 38.0 10.2 0.5 - 9,263.0

Debt securities in issue - 18.4 0.1 1.5 - - - 20.0

Other financial liabilities 171.3 6.7 0.6 - - - - 178.6

TOTAL 9,350.4 194.0 86.8 106.1 89.8 162.6 - 9,989.7

Loan and guarantee commitments given 67.3 43.1 235.9 82.5 39.2 28.2 - 496.2

5.5 Fair value disclosures

5.5.1 Fair value classification

Level 2: instruments measured based on recognised valuation models using observable inputs other than quoted prices

5.4.2 Contractual maturity

Level 1 comprises instruments whose fair value is determined based on directly usable prices quoted on active markets. This mainlyincludes listed securities and derivatives traded on organised markets (futures, options, etc.) whose liquidity can be demonstrated, andshares of funds where the value is determined and reported on a daily basis.

Level 1: instruments quoted on an active market

The following table shows the Group's financial assets and liabilities, analysed by remaining contractual maturity at the balance sheetdate.

Level 3: instruments measured using models that are not commonly used and/or that draw on non-observable inputs

Level 2 comprises instruments not directly quoted on an active market, measured using a valuation technique incorporating parametersthat are either directly observable (prices) or indirectly observable (price derivatives) through to maturity.

Level 3 comprises instruments which are measured, at least in part, on the basis of non-observable market data which is liable tomaterially impact the valuation.

For financial reporting purposes, IFRS 13 requires fair value measurements applied to financial instruments to be allocated to one ofthree Levels, reflecting the extent to which the valuation is based on observable data.

Loan and guarantee commitments given are disclosed in the period in which they could first be drawn down.

The undiscounted cash flows of liabilities and commitments are not materially different from the amounts disclosed in the contractualmaturity table above.

46

5.5.2 Fair value of financial instruments

Carried at amortised cost

Carrying value Fair value Level 1 Level 2 Level 3

Financial assets

Cash and amounts due from central banks 4,859.5 4,859.5 - 4,859.5 -

Securities at amortised cost 761.5 763.4 724.6 38.8 -

Loans and advances to banks 1,939.0 1,939.0 - 1,939.0 -

Loans and advances to customers 3,032.3 3,030.6 - 3,010.0 20.6

TOTAL 10,592.3 10,592.5 724.6 9,847.3 20.6


Due to banks and other financial institutions 502.1 511.1 - 511.1 -

Due to customers 9,263.0 9,263.0 - 9,263.0 -

Debt securities in issue 20.0 20.0 - 20.0 -

TOTAL 9,785.1 9,794.1 - 9,794.1 -

Carrying value Fair value Level 1 Level 2 Level 3

Financial assets

Cash and amounts due from central banks 3,868.9 3,868.9 - 3,868.9 -

Loans and advances to banks 1,730.2 1,730.2 - 1,730.2 -

Loans and advances to customers 2,989.9 2,987.1 - 2,947.7 39.4

TOTAL 8,589.0 8,586.2 - 8,546.8 39.4


Due to banks and other financial institutions 636.4 647.6 - 647.6 -

Due to customers 7,771.0 7,771.0 - 7,771.0 -

Debt securities in issue 95.6 95.6 - 95.6 -

TOTAL 8,503.0 8,514.2 - 8,514.2 -

The fair value of financial instruments at amortised cost is determined at the reporting date as follows:

In millions of euro30/06/2018

In millions of euro31/12/2017

- Loans to customers and their associated interest rates: these are compared, by maturity, with similar recent transactions. In the eventof a material difference in interest rates or any other factor indicating that an asset’s fair value is materially different from the netcarrying amount, the fair value is adjusted accordingly. To determine the asset's fair value, the Group estimates the counterparty'sdefault risk and calculates the sum of future cash flows, taking into account the debtor's financial standing. An impaired loan where thecarrying value of the loan is decided by a DCF, using best estimates of recoverable cash flows, is classified in Level 3.

- Repurchase agreements and amounts due to banks and customers: the fair value of these instruments is determined using a DCFtechnique, the discount rate of which is adjusted for the appropriate credit margin.

- Debt securities in issue: the fair value of these instruments is determined using external prices which can be regularly observed froma reasonable number of market makers. However, these prices do not represent a directly tradable price.

47

Carried at fair value

Level 1 Level 2 Level 3

Financial assets

Trading securities - - - -

Financial assets at FVTPL 1,081.9 502.2 544.6 35.1

Derivative financial instruments 46.3 - 46.3 -

FVOCI public bills and similar securities 135.5 135.5 - -

FVOCI bonds, other fixed income securities and accrued interest 2.0 2.0 - -

FVOCI equity securities 112.0 112.0 - -

TOTAL FINANCIAL ASSETS 1,377.7 751.7 590.9 35.1



TOTAL FINANCIAL LIABILITIES 26.1 - 26.1 -

Level 1 Level 2 Level 3

Financial assets

Trading securities 30.6 30.6 - -

Financial assets at FVTPL 500.0 42.0 458.0 -


AFS public bills and similar securities 112.3 112.3 - -

AFS bonds, other fixed income securities and accrued interest 874.4 825.2 45.8 3.4

AFS equity securities 609.7 568.0 8.3 33.4

TOTAL FINANCIAL ASSETS 2,144.4 1,578.1 529.5 36.8



TOTAL FINANCIAL LIABILITIES 31.4 - 31.4 -

In millions of euro

31/12/2017

TOTAL Measured using

In millions of euro

30/06/2018

TOTAL Measured using

48

5.5.3 Fair value Level 3 disclosures

Valuation technique by class of Level 3 financial assets

Fair value

at 30 June 2018

(in millions of

euro)

1.7

4.1

FVTPL debt 5.8

28.3

1.0

FVTPL equity 29.3

Sensitivity of fair value for Level 3 instruments

Movement in Level 3 assets

In millions of euro Bonds and

other fixed

income

securities

Funds and

other equities

TOTAL

As at 1 January 2018 3.4 33.4 36.8

Total gains or losses for the period included in income statement 2.6 (1.3) 1.3

Additions - 1.2 1.2

Disposals - (4.1) (4.1)

Exchange (0.2) 0.1 (0.1)

AS AT 30 JUNE 2018 5.8 29.3 35.1

Valuation technique Unobservable input Range (weighted average)

Securities portfolios (CDOs, CLOs, etc.)

Discounted cash flow, based on expected cash

flows of securitised assets and expectation of how

these will be distributed to different noteholders

Default and recovery data according to the various asset

classes

n/a

Following the adoption of IFRS 9 Financial Instruments, assets which were previously categorised as available for sale are nowclassified as FVTPL.

Purchases, issues, sales and settlements

The following table presents the movement in assets valued using Level 3 valuation methods in the period:

Out of €29.3 million of FVTPL equity securities classified in Level 3 as at 30 June 2018, €28.3 million were subject to a third-partyvaluation. To quantify the fair value sensitivity of these instruments, measured using unobservable inputs, the Group has determinedthe impact in the event of a fall of 5% in the carrying value. In such an event, there would be a pre-tax charge to the income statementof €1.4 million.

External valuation n/a n/a

Valued at cost n/a n/a

Funds and other equity

Mezzanine debt securities Carrying value based on original investment plus

accrued interest less any impairment provisions

Expected repayment cash flow taking into account

shareholders' equity of the borrower

n/a

Description

49

5.5.4 Selected controls in the valuation process

Merchant Banking

Valuation of derivatives

The Group's OTC (i.e. non-exchange traded) derivatives are valued using external valuation models. These models calculate thepresent value of expected future cash flows. The Group’s derivative products are of a "vanilla" nature, such as interest rate swaps andcross-currency swaps; for these, the modelling techniques used are standard across the industry. Inputs to the valuation models aredetermined from observable market data, including prices available from exchanges, dealers, brokers or providers of consensus pricing.

Exchange traded derivatives are valued by the exchange on which they are traded, which asks for margin calls depending on the value.

The calculation of fair value is subject to control procedures aimed at verifying that fair values are determined or validated by anindependent function. Fair values determined by reference to external quoted prices or market parameters are validated by the relevantfund's valuation committee.

These committees review, twice a year, the valuation of the investments made by Merchant Banking.

The parameters of valuation that are reviewed in committee include the following:- the origin of the external source;- the consistency of the various sources;- the events that took place during the period which could affect the value; and- the frequency with which the data are updated.

Merchant banking funds are valued by their management companies in accordance with the international private equity and venturecapital valuation (IPEV) guidelines developed by the Association Française des Investisseurs en Capital (AFIC), the British Venture

Capital Association (BVCA) and the European Private Equity and Venture Capital Association (EVCA). Dedicated advisory committeesexist to approve half-yearly investment valuations, which are sent to investors in the Group’s merchant banking funds. As such, thesecommittees act as the valuation committees under the Alternative Investment Fund Managers Directive (AIFMD) requirements.

50

6. Notes to the balance sheet

Note 1 - Financial instruments at fair value through profit or loss

1. Financial assets

In thousands of euro 30/06/2018 31/12/2017

Equity securities - 467,178

Debt securities - -

Loans to customers 23,810 32,859

Financial assets designated at fair value through profit or loss 23,810 500,037

Debt securities 36,375 -

Equity instruments issued by mutual funds 426,724 -

Other equity instruments 594,993 -

Trading equities - 30,598

Financial assets mandatorily at fair value through profit or loss 1,058,092 30,598

Trading derivative assets (see note 2) 46,347 17,379

TOTAL 1,128,249 548,014

2. Financial liabilities


20,036 24,823

TOTAL 20,036 24,823

Trading derivative liabilities (see note 2)

51

Note 2 - Derivatives

Trading derivatives

In thousands of euro Notional

principalOf which:

asset

Of which:

liability

Notional

principalOf which:

asset

Of which:

liability

Firm interest rate contracts 169,527 2,778 126 141,972 958 308

Conditional interest rate contracts 10,543 - 136 19,150 178 175

Firm foreign exchange contracts 5,626,110 42,929 19,406 5,293,305 15,435 23,725

Conditional foreign exchange contracts 223,852 561 171 240,971 501 482

Other swaps 7,100 - 170 - - -

Equity-related options 18,929 79 27 69,893 307 133

TOTAL 6,056,061 46,347 20,036 5,765,291 17,379 24,823

Hedging derivatives

In thousands of euro Notional

principalOf which:

asset

Of which:

liability

Notional

principalOf which:

asset

Of which:

liability

Firm interest rate contracts 126,000 - 6,015 137,000 - 6,543

TOTAL 126,000 - 6,015 137,000 - 6,543

Total Demand -

1 month

1m-3m 3m-1yr 1yr-5yr >5yr

Fair value hedges - interest rate swap

Notional (in millions of euro) 126,000 - - 17,000 54,000 55,000

Average fixed interest rate paid - - 1.87% 2.07% 1.13%

30/06/2018 31/12/2017

30/06/2018 31/12/2017

Only the interest risk element is hedged; other risks, such as credit risk, are managed but not hedged by the Group. The interest rate riskcomponent which is hedged is the change in fair value of the medium/long-term fixed rate customer loans arising solely from changes inEONIA (the benchmark rate of interest). Such changes are usually the largest component of the overall change in fair value.

For the purposes of hedge accounting, efficiency tests are performed, prospectively at the date of designation and retrospectively at eachbalance sheet date, to ensure that there is no risk of over-coverage. There is no charge or credit in the income statement due toineffectiveness of these hedges.

Most of these macro hedging swaps are carried out against EONIA and are intended to be held until maturity without periodic revision (i.e.they are non-dynamic).

The following table sets out the maturity profile and average fixed rate payable on the hedging instruments that are used in the Group'snon-dynamic hedging strategies:

The Group holds a portfolio of medium and long-term fixed rate customer loans and is, therefore, exposed to changes in fair value due tomovements in market interest rates. The Group manages this risk exposure by entering into interest rate swaps whereby it pays fixed ratesand receives floating rates. The Group applies hedge accounting to these derivatives, which it treats as fair value hedges.

52

In thousands of euro 30/06/2018

Carrying amount of hedged fixed rate loans 438,572

Accumulated amount of fair value adjustments on the hedged loans 6,015

Change in fair value of hedged loans for ineffectiveness assessment (528)

Offsetting financial assets and financial liabilities

30/06/2018

In thousands of euro Gross assets Amounts set

off

Net amounts

as per

balance

sheet

Trading derivative assets 73,633 (27,286) 46,347

Loans and advances to banks 1,952,460 (13,415) 1,939,045

Other assets not subject to netting 11,336,917 - 11,336,917

Total assets 13,363,010 (40,701) 13,322,309

Due to banks 507,504 (5,413) 502,091

Trading derivative liabilities 55,324 (35,288) 20,036

Other liabilities not subject to netting 10,320,853 - 10,320,853

Total liabilities 10,883,681 (40,701) 10,842,980

The following table contains details of the exposure in loans and advances to customers at the period end that are covered by the Group's hedging strategies:

The following table shows the impact on the consolidated balance sheet of offsetting assets and liabilities with the same counterparties.The hypothetical financial impact of netting instruments subject to an enforceable master netting arrangement, or similar agreements, withavailable cash and financial instrument collateral would not be material.

53

Note 3 - Financial assets at fair value through other comprehensive income


Public bills and similar securities 135,515

Other fixed income securities 1,940

Accrued interest 36

Total FVOCI debt securities 137,491

Strategic equity securities 112,027

Total FVOCI equity securities 112,027

TOTAL 249,518

Note 4 - Available-for-sale financial assets


Public bills and similar securities 112,267

Other fixed income securities 874,085

Accrued interest 337

Total AFS debt securities 986,689

of which impairment losses (9,837)

Total AFS equity securities 609,654

of which impairment losses (124,325)

TOTAL 1,596,343

Note 5 - Securities at amortised cost


Debt securities at amortised cost - gross amount 761,762

Stage 1-2 allowances (271)

TOTAL 761,491

Strategic equity securities designated as FVOCI consist of an 8.4% equity investment in EdRS Group. The security has been held formany years and fluctuations in its short term share price have not been considered relevant to the Group's performance measures.

From 1 January 2018, AFS assets do not exist and have been reclassified to other balance sheet categories (section 3.1.2).

Before 1 January 2018, securities at amortised cost did not exist as a balance sheet category.

As explained in section 1.3, on 6 August 2018 the Group and Edmond de Rothschild completed their agreement to unwind all of theircross-shareholdings. As a result, the holding in EdRS was sold by the Group on that date.

54

Note 6 - Loans and advances to banks


Interbank demand deposits and overnight loans 875,752 1,032,840

Interbank term deposits and loans 181,467 159,610

Reverse repos and loans secured by bills 880,398 536,456

Accrued interest 1,428 1,247

Loans and advances to banks - gross amount 1,939,045 1,730,153

Allowance for credit losses - -

TOTAL 1,939,045 1,730,153

Note 7 - Loans and advances to customers


Overdrafts 282,509 186,765

PCL loans to customers 2,486,642 2,446,474

Other loans to customers 323,394 415,189


Loans and advances to customers – gross amount 3,111,539 3,066,842

Specific provisions (IAS 39) - (57,066)

Collective provisions (IAS 39) - (19,857)

Stage 1-2 allowances (IFRS 9) (16,167) -

Stage 3 allowances (IFRS 9) (63,100) -

Allowance for credit losses (79,267) (76,923)

3,032,272 2,989,919

Note 8 - Other assets


217,384 220,968

16,263 19,288

43,916 75,094

Defined benefit pension scheme assets (note 12) 51,598 19,523

172,882 180,920

Other assets 502,043 515,793

31,360 25,069

106,849 111,001

Prepayments and accruals 138,209 136,070

640,252 651,863

Guarantee deposits paid(1)

TOTAL

Accounts receivable(1)

Settlement accounts for transactions of securities(1)

Other sundry assets

Prepaid expenses

Accrued income(1)

TOTAL

(1) These balances represent other financial assets as reported in section 5.

55

Note 9 - Due to banks and other financial institutions


Interbank demand and overnight deposits 178,492 261,312

Repurchase agreements 50,000 -

Interbank term deposits and borrowings 268,389 370,145


502,091 636,377

Note 10 - Customer deposits


Demand deposits 8,570,235 7,085,767

Term deposits 618,455 604,680

Borrowings secured by bills 72,357 79,143


9,263,028 7,770,954

Note 11 - Other liabilities, accruals and deferred income


Due to employees 398,742 485,443

Other accrued expenses and deferred income 187,898 195,532

Accrued expenses 586,640 680,975

Settlement accounts for transactions of securities(1) 157,024 128,893

Accounts payable (1) 21,575 21,207

Sundry creditors 115,884 118,302

Other liabilities 294,483 268,402

881,123 949,377

(1) These balances represent other financial liabilities as reported in section 5.

TOTAL

TOTAL

TOTAL

56

Note 12 - Provisions

In thousands of euro 01/01/2018 Impact of

introduction of

IFRS 9

Charge/

(release)

Utilised Exchange

movement

Other

movements30/06/2018

Provisions for counterparty risk 995 99 - - - - 1,094

Provisions for claims and litigation 30,896 - (2,190) (3,839) 54 10 24,931

Provisions for property 324 - 12 - 3 - 339

Provisions for staff costs 2,783 - 117 - (9) (711) 2,180

Other provisions - - 4,313 - - - 4,313

Subtotal 34,998 99 2,252 (3,839) 48 (701) 32,857

Retirement benefit liabilities 53,272 n/a n/a n/a n/a (20,206) 33,066

TOTAL 88,270 99 2,252 (3,839) 48 (20,907) 65,923

Note 13 - Impairments

In thousands of euro 01/01/2018 Impact of

adopting IFRS 9

Income

statement

charge

Income

statement

reversal

Written off Exchange rate

and other

movements

30/06/2018

Loans and advances to customers (76,923) (4,740) (7,268) 9,323 472 (131) (79,267)

Available-for-sale financial assets (134,162) 134,162 - - - - -

Other financial assets (18,272) (1,207) (1,828) 263 3,118 (479) (18,405)

Securities at amortised cost - (359) - 88 - - (271)

TOTAL (229,357) 127,856 (9,096) 9,674 3,590 (610) (97,943)

The impact of adopting IFRS 9 is explained in section 3.1, in particular in the table disclosed in 3.1.4.

From time to time the Group is involved in legal proceedings or receives claims arising from the conduct of its business. Based uponavailable information and, where appropriate, legal advice, provisions are made where it is probable that an outflow of resources will berequired and the amount can be reliably estimated.

Also within provisions for claims and litigation are amounts set aside to cover estimated costs of other legal proceedings and claimsarising from the conduct of business.

Management believes that the level of provisions made in these financial statements continues to be sufficient for any potential or actualproceedings or claims which are likely to have an impact on the Group’s financial statements, based on information available at thereporting date.

Retirement benefit liabilities (above) and assets (note 8) arise mainly from defined benefit pension schemes in the United Kingdom, theUS and Switzerland, and represent the difference between the present value of the defined benefit obligation at the balance sheet dateand the fair value of any plan assets. The values of assets and obligations in the principal schemes are prepared by qualifiedindependent actuaries for the half year and year-end accounts and the net movement in the liability is shown in the table above. Furtherinformation on retirement benefit obligations is provided in the financial statements for the period ended 31 December 2017.

Other provisions represent a central impairment charge.

57

Note 14 - Deferred tax


Net (liability) / asset as at beginning of period (374) 1,637

of which deferred tax assets 60,561 67,966

of which deferred tax liabilities (60,935) (66,329)

Recognised in income statement

Income statement (expense) / income (9,763) 1,513

Recognised in equity

Defined benefit pension arrangements (6,891) (2,853)

Financial assets at fair value through other comprehensive income 662 830

Reclassification to current tax (427) 246

Exchange differences (219) (2,032)

Purchase/sale of a subsidiary 6 413

Change in accounting policies 2,006 -

Other 1,932 (128)

NET (LIABILITY)/ASSET AS AT END OF PERIOD (13,068) (374)

of which deferred tax assets 45,738 60,561

of which deferred tax liabilities (58,806) (60,935)


Deferred profit share arrangements 18,176 22,599

Losses carried forward 10,959 12,171

Defined benefit pension liabilities 1,305 10,300

Provisions 7,481 6,803

Accelerated depreciation 2,640 2,973

Financial assets at fair value 630 116

Other temporary differences 4,547 5,599

TOTAL 45,738 60,561

The movement on the deferred tax account is as follows:

Deferred tax net assets are attributable to the following items:

58


Fair value adjustments to properties 17,361 17,340

17,254 18,445

13,459 13,674

1,622 1,911

2,078 1,956

7,032 7,609

TOTAL 58,806 60,935

system check


(1,814) (2,041)

(4,416) (3,182)

(459) (631)

(608) 467

(1,695) 4,120

(981) (405)

210 3,185

TOTAL (9,763) 1,513

Other temporary differences

Intangible assets recognised following acquisition of subsidiaries

Other temporary differences

Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to set-off and the balance relates toincome tax levied by the same tax authority on the same taxable entity or tax group. There must also be the intention and the will tosettle on a net basis or to realise the assets and liabilities simultaneously.

Depreciation differences

Defined benefit pension liabilities

Allowances for loan losses

Tax losses carried forward

Deferred profit share arrangements

Financial assets carried at fair value

The deferred tax (expense) / income in the income statement comprises the following temporary differences:

Financial assets at fair value

The majority of the Group's deferred tax assets are in NMR, a UK subsidiary. For these financial statements, NMR considers thatthere will be sufficient profits within eight years to utilise deferred tax assets that remain recognised on its balance sheet.

Accelerated capital allowances

Defined benefit pension assets

In accordance with the Group’s accounting policy, some deductible temporary differences have not given rise to the recognition ofdeferred tax assets, mainly in the United States, Canada, the UK and Asia. Unrecognised deferred tax assets amounted to €60.8million at 30 June 2018 (€56.7 million at 31 December 2017).

Deferred tax net liabilities are attributable to the following items:

59

Note 15 - Structured entities

- remuneration and other economic interests in aggregate; and

- kick-out rights.

In thousands of euro Equity funds Debt funds TOTAL

Total assets within the underlying vehicles 1,990,554 4,300,805 6,291,359

Assets under management including third party commitments 3,312,036 5,244,310 8,556,346

Interest held in the Group's balance sheet:

Financial assets at FVTPL 383,340 85,071 468,411

Financial investments at amortised cost - 38,431 38,431

Loans and advances to customers 19,313 4,496 23,809

Total assets in the Group's balance sheet 402,653 127,998 530,651

Off-balance sheet commitments made by the Group 241,144 51,959 293,103

Group's maximum exposure 643,797 179,957 823,754

A structured entity is one which has been designed so that voting or similar rights are not the dominant factor in deciding whocontrols the entity. It will often have restricted activities and a narrow or well-defined objective and can include some investmentfunds.

In most cases it is clear under IFRS 10 that the Group need not consolidate its investments in structured entities. However, somestructured entities are managed by the Group in the form of funds in which the Group's own money is also invested. In thesesituations, a judgement must be made as to whether there is a need to consolidate these funds or not. To do this, a combinedassessment of two key indicators is made:

To assess economic interests it is considered, at a particular level of returns, how much of any further increase in the performanceof a fund accrues to the manager ("the variability of the economic interest"). The level of returns at which this is measured is thelevel at which performance fees begin to accrue.

A high level of variability would support the conclusion that a manager might be a principal (and would probably consolidate themanaged fund). Meanwhile, a low level of variability would indicate that a manager might be an agent for the other investors (andwould probably not consolidate).

Additionally, negligible rights for the investors to remove the manager or transfer their funds might indicate that a manager is aprincipal (and would probably consolidate) while strong rights might suggest that a manager is an agent (and would probably notconsolidate).

The Group's judgement is guided by both IFRS 10 and its understanding of market practice.

Interest in unconsolidated structured entities

The following table shows the Group’s interest in unconsolidated structured entities which it manages.

30/06/2018

60

Note 16 - Non-controlling interests

01/01/18

30/06/18

(6 months)

30/06/2018 01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

31/12/2017 01/04/17

30/09/17

(6 months)

In thousands of euro Net income Amounts in the

balance sheet

Distributions Net income Amounts in the

balance sheet

Distributions

Preferred shares 54,420 68,723 155,763 78,533 170,036 1,038

Perpetual subordinated debt 7,393 291,715 7,407 7,021 288,999 6,926

Rothschild Holding AG group 2,233 59,544 535 1,269 58,271 744

Other 411 11,462 546 936 22,903 918

TOTAL 64,457 431,444 164,251 87,759 540,209 9,626

Preferred shares

Perpetual subordinated debt


167,239 166,605

58,492 58,270

65,984 64,124

TOTAL 291,715 288,999

Subsidiaries inside the Group have issued perpetual subordinated debt instruments which have discretionary clauses relating tothe payment of the interest. Under IFRS, these instruments are considered to be equity instruments and are shown as part ofNCI because they were issued by subsidiaries and not held by the Group. The interest payable on these instruments is shown asa charge to NCI. The instruments are shown below.

Non-controlling interests (NCI) represent the share of fully consolidated subsidiaries that is not directly or indirectly attributable tothe Group. These interests comprise the equity instruments which have been issued by these subsidiaries and which are not heldby the Group. The Group's income, net assets and distributions which are attributable to NCI arise from the following sources:

Preferred shares within NCI mainly consist of amounts calculated in accordance with legal clauses applicable to French limitedpartnerships owned by Rothschild Martin Maurel SCS, the French holding company of our WAM and GA businesses located inFrance. The preferred amounts are based on the partnerships' individual local earnings, and take into account the share thatrelates to workers' remuneration.

Perpetual fixed rate subordinated notes 9 per cent (£125 million)

Perpetual floating rate subordinated notes (€150 million)

Perpetual floating rate subordinated notes (US$200 million)

61

Rothschild Holding AG group


01/01/18

30/06/18

(6 months)

01/04/17

31/12/17

(9 months)

113,004 158,839

26,817 19,109

(3,903) (38,728)

22,914 (19,619)

30/06/2018 31/12/2017

3,046,265 2,658,600

175,602 255,165

1,215,299 1,120,016

418,389 412,845

4,855,555 4,446,626

3,075,407 2,743,959

1,146,962 1,086,180

4,222,369 3,830,139

633,186 616,487

Note 17 - Net cash and cash equivalents


4,859,507 3,868,907

875,752 1,032,840

506,739 281,672

Interbank demand deposits and overnight loans (liabilities) and due to central banks (178,492) (261,312)

TOTAL 6,063,506 4,922,107

Cash includes cash on hand and demand deposits placed with banks. Other cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of value change. These comprise overnight interbank reverse repos and public bills which are held for trading.

Cash and accounts with central banks

Interbank demand deposits and overnight loans (assets)

Other cash equivalents

For the purposes of drawing up the cash flow statement, the "cash and cash equivalents" items are analysed as follows:

(1) Other comprehensive income in RHAG comprises gains and losses from translation, actuarial movements and revaluation of long-standing

shareholdings.

As explained in section 1.3 above, on 6 August 2018 the Group and Edmond de Rothschild completed their agreement to unwindall of their cross-shareholdings. As a result, from that date RHAG will be wholly owned by the Group. The transactions to unwindthe cross-shareholdings will be accounted for in the second half of 2018.

Total assets

Other liabilities

Total liabilities

Shareholders' equity

Due to customers

Cash and amounts due from central banks

Loans and advances to banks

Loans and advances to customers

Other assets

Total comprehensive income for the period

Balance sheet information

At 30 June 2018 the Group held a 90.09% (31 December 2017: 90.09%) economic interest in the equity of Rothschild HoldingAG (RHAG), the Swiss holding company of part of our Wealth Management business. The non-controlling interest in the Group'sincome statement and balance sheet is calculated based on this economic interest.

The following table shows a summarised income statement and balance sheet of the RHAG group of companies.

RHAG Group

Income statement information

Net banking revenue

Net income

Total other comprehensive income for the period, after tax (1)

62

Commitments given30/06/2018 31/12/2017

259 1,500

343,375 418,186

Loan commitments 343,634 419,686

50,124 45,208

102,345 98,956

Guarantee commitments 152,469 144,164

241,749 264,057

Irrevocable nominee commitments 156,927 130,601

40,803 57,229

Other commitments given 439,479 451,887

Commitments received

30/06/2018 31/12/2017

263,763 313,727

Loan commitments 263,763 313,727

87,547 97,184

- 3,232

Guarantee commitments 87,547 100,416

Operating lease commitments payable

Land and

buildingsOther

Land and

buildingsOther

Up to one year 35,418 1,726 34,295 1,698

Between one and five years 126,934 1,993 118,230 983

Over five years 109,210 - 124,846 -

TOTAL 271,562 3,719 277,371 2,681

30/06/2018

Received from banks

Given to banks

Investment commitments relate to Merchant Banking funds and investments. Irrevocable nominee commitments representcommitments to funds where the Group acts as a nominee on behalf of its clients. The commitment to employees in respect ofdeferred remuneration is set out in note 24.

31/12/2017


Received from banks

Received from customers

The operating lease commitments above mainly relate to leases of rented offices around the world.

Note 18 - Commitments given and received


Given to customers

Given to banks

Given to customers

Investment commitments

Pledged assets and other commitments given


63

7. Notes to the income statementNote 19 - Net interest income

Interest income


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Interest income - loans to banks 2,489 2,993

Interest income - loans to customers 35,093 33,660

Interest income - available-for-sale instruments - 4,770

Interest income - debt securities at FVTPL 410 -

Interest income - debt securities at FVOCI 105 -

Interest income - debt securities at amortised cost 2,653 -

Interest income - derivatives 27,326 25,393

Interest income - other financial assets 295 1,121

TOTAL 68,371 67,937

Interest expense


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Interest expense - due to banks and other financial institutions (8,072) (5,610)

Negative interest income from loans to banks (12,689) (13,636)

Interest expense - due to customers (5,975) (6,460)

Interest expense - debt securities in issue (36) (85)

Interest expense - derivatives (1,482) (1,918)

Interest expense - other financial liabilities (1,058) (1,372)

TOTAL (29,312) (29,081)

Note 20 - Net fee and commission income

Fee and commission income


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Fees for advisory work and other services 644,615 502,112

Portfolio and other management fees 272,911 265,207

Banking and credit-related fees and commissions 3,068 4,030

Other fees 6,989 7,886

TOTAL 927,583 779,235

Fee and commission expense


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Fees for advisory work and other services (6,223) (6,929)

Portfolio and other management fees (38,523) (37,453)

Banking and credit-related fees and commissions (312) (301)

Other fees (2,459) (2,835)

TOTAL (47,517) (47,518)

The first-time application of IFRS 15 has no impact on the accounting principles applicable to fee and commission income.

64


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Net income - financial instruments at fair value through profit or loss 47,549 24,637

Net income - carried interest 27,269 15,893

Net income - foreign exchange operations 12,784 11,406

Net income - equity securities and related derivatives held for trading - 639

Net income - other trading operations (3) 1,624

TOTAL 87,599 54,199


01/01/18

30/06/18

(6 months)

Dividend income from strategic equity securities designated at FVOCI -

TOTAL -


01/04/17

30/09/17

(6 months)

Gains or losses on disposal 27,347

Impairment losses on AFS equities (1,345)

Dividend income 2,750

TOTAL 28,752

Note 21 - Net gains / (losses) on financial instruments at fair value through profit or loss

Net gains and losses on financial instruments at fair value through profit or loss include the changes in fair value of financialinstruments at fair value through profit or loss, and financial instruments held in the trading portfolio, including derivatives.

Dividend income from the Group's interest in EdRS is included as dividend income within "net income / (expense) from otherassets" (note 26).

Financial instruments at fair value through profit or loss include both ordinary equity and carried interest shares held by theGroup in its Merchant Banking funds. They also include certain loans made to its Merchant Banking funds.

Note 22 - Net gains / (losses) on financial assets at fair value through other

comprehensive income

Note 23 - Net gains / (losses) on available-for-sale financial assets

65

Note 24 - Operating expenses


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Compensation and other staff costs (567,810) (472,146)

Defined benefit pension expenses (8,381) (9,821)

Defined contribution pension expenses (6,278) (6,280)

Staff costs (582,469) (488,247)

Administrative expenses (150,440) (146,426)

TOTAL (732,909) (634,673)

Staff costs


Impairment Impairment

reversal

Recovered

loans01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Loans and advances to customers (7,268) 9,246 77 2,055 (3,801)

Available for sale financial assets - - - - 1,120

Securities at amortised cost - 88 - 88 -

Other assets (1,828) 263 - (1,565) (1,675)

TOTAL (9,096) 9,597 77 578 (4,356)

As part of its variable pay strategy, the Group pays bonuses to employees. In some cases, the cash payment is deferred tofuture years.

Deferred cash awards are paid one, two and three years after the year of the award, and the expense is recognised over thetwo, three and four-year periods from the start of the year of the award to the date of payment. These awards are paid on thecondition that the recipient is still an employee of the Group. For certain employees, a portion of the deferred bonus will besettled in the form of R&Co shares rather than cash, in response to the Capital Requirements Directive 4 (CRD4). The R&Coshares are released to the employees six months after the vesting date of the award.

A commitment to employees exists in connection with this deferred remuneration. Some of this has not yet accrued because itrelates to a future service period. The amount of potential future payments that have not yet accrued is €88.1 million (€79.2million as at 31 December 2017).

The objective of the deferred share-based payment awards is to link the reward of certain key staff with the performance of theGroup. In addition to the requirement to remain employed by the Group, these awards may also be cancelled under specificcircumstances.

Note 25 - Cost of risk

66

Note 26 - Net income / (expense) from other assets


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Dividend from long-standing shareholding, designated at FVOCI 5,474 5,242

Non-operating income / (expense) (145) -

Gains / (losses) on sales of tangible or intangible assets (376) 875

Gains / (losses) on acquisition, disposal and impairment of subsidiaries and associates (4,314) (358)

TOTAL 639 5,759

Note 27 - Income tax expense


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Current tax (26,492) (33,824)

Deferred tax (9,763) 4,152

TOTAL (36,255) (29,672)

Current tax


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Tax charge for the period (28,905) (25,120)

Adjustments related to prior periods 4,506 (3,154)

Irrecoverable dividend-related tax (2,133) (3,729)

Other 40 (1,821)

TOTAL (26,492) (33,824)

Deferred tax


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

Temporary differences (9,288) 4,138

Changes in tax rates 309 248

Adjustments related to prior years (784) (234)

TOTAL (9,763) 4,152

The net tax charge can be analysed between a current tax charge and a deferred tax charge as follows:

67

Reconciliation of the tax charge between the French standard tax rate and the effective rate


01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)


Expected tax charge at standard French corporate

income tax rate34.4% 90,128 34.4% 70,799

Main reconciling items (1)

Impact of foreign profits and losses taxed at different rates

(15.0%) (39,251) (13.1%) (27,035)

Tax on partnership profits recognised outside the Group (6.3%) (16,533) (11.9%) (24,443)

Tax impacts relating to prior years (1.4%) (3,722) +1.6% 3,332

Tax on income from associate recorded net of tax (0.2%) (410) (0.1%) (295)

Tax impact on deferred tax relating to change of the corporate income tax rate

(0.1%) (309) (0.1%) (160)

Permanent differences +0.3% 909 +0.4% 843

(Gains) / losses where no deferred tax is recognised +0.5% 1,382 (0.5%) (1,113)

Tax on dividends received through partnerships +0.6% 1,457 +1.8% 3,602

Irrecoverable and other dividend-related taxes +0.8% 2,133 +1.8% 3,729

Other tax impacts +0.2% 471 +0.2% 413

Actual tax charge 13.8% 36,255 14.4% 29,672

EFFECTIVE TAX RATE 13.8% 14.4%

(1) The categories used in the comparative disclosure are presented in a way that is consistent with the categories used to explain the tax in the current period.

68

Note 28 - Related parties

In thousands of euro Companies

accounted

for by the

equity method

Executive

Directors

Other

related

parties

Companies

accounted

for by the

equity method

Executive

Directors

Other

related

parties

Assets

Loans and advances to customers 5,037 - 9,706 4,925 - 10,111

Other assets 2 - 6 25 - 39

TOTAL ASSETS 5,039 - 9,712 4,950 - 10,150

Liabilities

Due to customers - 2,622 66,478 - 2,814 56,133

Other liabilities 145 - - - - -

TOTAL LIABILITIES 145 2,622 66,478 - 2,814 56,133

Loan and guarantee commitments

Guarantees and commitments given - - 1,559 - - 125

TOTAL COMMITMENTS - - 1,559 - - 125

In thousands of euro Companies

accounted

for by the

equity method

Executive

Directors

Other

related

parties

Companies

accounted

for by the

equity method

Executive

Directors

Other

related

parties

Income and expenses from transactions with related parties

Net interest received 113 12 6 - - 17

Net fee and commission income / (expense) (410) - - - - -

Other income - - 62 1,120 - 237

TOTAL NET BANKING INCOME (297) 12 68 1,120 - 254

Other expenses (285) - (1,188) (348) - (732)

TOTAL EXPENSES (285) - (1,188) (348) - (732)

01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

30/06/2018 31/12/2017

69

Note 29 - Segmental information

Segmental information split by businessIn thousands of euro Global

Advisory

Wealth &

Asset

Management

Merchant

Banking

Other

business and

corporate

centre

Total before

IFRS

reconciliation

IFRS

reconciliation

01/01/18

30/06/18

(6 months)

Net banking income 636,085 261,439 104,973 15,159 1,017,656 (11,140) 1,006,516


Cost of risk - - - - - 578 578



Non-operating income - - - - - 639 639



Advisory

Wealth &

Asset

Management

Merchant

Banking

Other

business and

corporate

centre

Total before

IFRS

reconciliation

IFRS

reconciliation

01/04/17

30/09/17

(6 months)

Net banking income 492,072 246,906 97,484 19,523 855,985 (3,639) 852,346


Cost of risk - - - - - (4,356) (4,356)



Non-operating income - - - - - 5,759 5,759


Net banking income split by geographical segments


01/01/18

30/06/18

(6 months)

%

01/04/17

30/09/17

(6 months)

%

United Kingdom and Channel Islands 342,005 34% 181,585 21%

France 245,094 24% 292,724 34%

Rest of Europe 190,446 19% 151,433 18%

Americas 126,523 13% 133,064 16%

Switzerland 60,999 6% 60,020 7%

Australia and Asia 29,209 3% 26,146 3%

Other 12,240 1% 7,374 1%

TOTAL 1,006,516 100% 852,346 100%

The breakdown by geographic segment is based on the geographic location of the entity that records the income.

The table below presents a segmental analysis by business line, used internally for assessing business performance, which is then adjustedto conform to the Group's statutory accounting policies. The reconciliation to IFRS mainly reflects: the treatment of profit share paid to Frenchpartners as non-controlling interests; accounting for deferred bonuses over the period that they are earned; the application of IAS 19 fordefined benefit pension schemes; a central impairment provision in "net income / (expense) from other assets"; and reallocation ofimpairments and certain operating income and expenses for presentational purposes.

Following the change of financial year end, further consolidated income statement data has been prepared to aid comparison betweenreporting periods. This information includes additional segmental information and is set out in section 1. Highlights.

70

Note 30 - Earnings per share

Net income - Group share (millions of euro)

preferred dividends adjustment (millions of euro)

Net income - Group share after preferred dividends adjustment (millions of euro)

Basic average number of shares in issue - 000s

Earnings per share - basic (euro)

Diluted average number of shares in issue - 000s

Earnings per share - diluted (euro)

Note 31 - Consolidation scope

Company nameCountry of

operation

% Group

voting

interest

% Group

ownership

interest

% Group

voting

interest

% Group

ownership

interest

30/06/2018 31/12/2017

Concordia Holding SARL France 100.00 99.98 100.00 99.98 FC FC

K Développement SAS France 100.00 99.98 100.00 99.98 FC FC

Rothschild Martin Maurel SCS (2) France 99.99 99.82 99.99 99.82 FC FC

Rothschild GmbH Germany 100.00 99.66 100.00 99.66 FC FC

Rothshild Bank International Limited Guernsey 100.00 99.52 100.00 99.52 FC FC

Rothschild Europe BV Netherlands 100.00 99.66 100.00 99.66 FC FC

Rothschild Bank AG Switzerland 100.00 90.09 100.00 90.09 FC FC

Rothschild Concordia AG Switzerland 100.00 99.10 100.00 99.10 FC FC

Rothschild Holding AG (3) Switzerland 90.52 90.09 90.52 90.09 FC FC

Rothschilds Continuation Holdings AG (3) Switzerland 99.99 99.52 99.99 99.52 FC FC

N M Rothschild & Sons Limited United Kingdom 100.00 99.52 100.00 99.52 FC FC

Rothschild North America Inc. United States of

America

100.00 99.52 100.00 99.52 FC FC

(1) FC: full consolidation.

2.10 1.15

Basic earnings per share are calculated by dividing Net income - Group share (after removing accrued preferred dividends, which arenot part of the profit earned by ordinary shareholders) by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share are calculated using the treasury share method, whereby net income is divided by the weighted averagenumber of ordinary shares outstanding plus the bonus number of ordinary shares that would be issued through dilutive option orshare awards. Share options and awards which are dilutive are those which are in the money, based on the average share priceduring the period. The majority of potential ordinary shares which are not dilutive are connected to the R&Co Equity Scheme.

(2) Some subsidiaries are limited partnerships (sociétés en commandite simple). The percentage interest recorded in the consolidated accounts is calculated in

accordance with the statutory regulations applicable to limited partnerships based on the individual results of each partnership, after taking into consideration the

share attributable to workers' remuneration.

160.4 87.8

75,108

01/01/18

30/06/18

(6 months)

01/04/17

30/09/17

(6 months)

161.1 88.2

(0.7) (0.4)

(3) Following completion on 6 August 2018 of the agreement to unwind cross-shareholdings with Edmond de Rothschild, the Group has a voting interest of

100% from this date.

74,531

2.14 1.18

As there were no gains or losses on discontinued activities, the earnings per share on continuing activities are the same as earningsper share.

Following the change of financial year end, further earnings per share data has been prepared to aid comparison between reportingperiods. This further data is set out in section 1. Highlights.

As at 30 June 2018, the main entities in the Group's consolidation scope can be summarised as follows.

30/06/2018 31/12/2017 Consolidation

method (1)

76,401 76,113

71

This is a free translation into English of the statutory auditors’ review report on the half-yearly financial information issued in French and is provided solely for the convenience of English-speaking users. This report includes information relating to the specific verification of information given in the Group’s half-yearly management report. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.

For the period from January 1, 2018 to June 30, 2018

To the Shareholders,

In compliance with the assignment entrusted to us by your General Meeting and in accordance

with the requirements of article L. 451-1-2 III of the French Monetary and Financial Code ("Code

monétaire et financier"), we hereby report to you on:

the review of the accompanying half-year summary consolidated financial statements of

Rothschild & CO S.C.A., for the period from January 1, 2018 to June 30, 2018,

the verification of the information presented in the half-yearly management report.

These half-year summary consolidated financial statements are the responsibility of the

Management. Our role is to express a conclusion on these financial statements based on our

review.

I. Conclusion on the financial statements

We conducted our review in accordance with professional standards applicable in France. A

review of interim financial information consists of making inquiries, primarily of persons

responsible for financial and accounting matters, and applying analytical and other review

procedures. A review is substantially less in scope than an audit conducted in accordance with

professional standards applicable in France and consequently does not enable us to obtain

assurance that we would become aware of all significant matters that might be identified in an

audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the

accompanying half-year summary consolidated financial statements are not prepared, in all

material respects, in accordance with IAS 34 - standard of the IFRSs as adopted by the

European Union applicable to interim financial information.

Without prejudice to the conclusion expressed above, we draw your attention to the first time

application of IFRS 9 “Financial Instruments” explained in Note 3 “adoption of new accounting

standards” and Note 4.4 “changes in significant accounting policies” in the summary

consolidated financial statements.

II. Specific verification

We have also verified the information presented in the half-yearly management report on the

half-year summary consolidated financial statements subject to our review. We have no matters

to report as to its fair presentation and consistency with the half-year summary consolidated

financial statements.

Paris La Défense, on September 25, 2018

KPMG S.A.

Arnaud Bourdeille

Partner

Paris, on September 25, 2018

Cailliau Dedouit et Associés

Sandrine Le Mao

Partner

Statutory Auditors’ review on the half-year consolidated financial information

72

Persons responsible for the half-year financial report

Rothschild & Co Gestion SAS Mark CrumpManaging Partner Group Chief Financial Officer

Paris, 25 September 2018

Statement by the persons responsible for the half-year financial report

We hereby declare that, to the best of our knowledge, the the summary interim consolidated financial statements for the past six-month period havebeen prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profitor loss of the Company and all the other companies included in the scope of consolidation, and that the half-year activity report includes a fair reviewof the material events that occurred in the first six months of the financial year, their impact on the interim accounts and the main transactionsbetween related parties, together with a description of the principal risks and uncertainties for the remaining six months of the year.

Rothschild & Co Gestion SASManaging Partner

Represented by Alexandre de Rothschild, Chairman

Mark CrumpGroup Chief Financial Officer

73

About Rothschild & Co

With a team of c.3,500 talented financial services specialists on the ground in over 40 countries across the world, our integrated global network of trusted professionals provide in-depth market intelligence and effective long-term solutions for our clients in Global Advisory, Private Wealth & Asset Management, and Merchant Banking. Rothschild & Co is family-controlled and independent and has been at the centre of the world’s financial markets for over 200 years.

Rothschild & Co is a French partnership limited by shares (société en commandite par actions) listed on Euronext in Paris, Compartment A with a share capital of €154,925,024. Paris trade and companies registry 302 519 228. Registered office: 23 bis avenue de Messine, 75008 Paris, France.

For further information:

Investor RelationsMarie-Laure BecquartTel.: +33 (0)1 40 74 65 [email protected]

Media RelationsCaroline NicoTel.: +33 (0)1 40 74 43 [email protected]

For more information, please visit www.rothschildandco.com

Financial calendar:13 November 2018 Third quarter information 2018 (July - September)

12 March 2019 Full year results 2018 (January - December)14 May 2019 First quarter information 2019 (January - March)16 May 2019 Annual General Meeting

74

Annual Report 2017

Documents

Rothschild & Co · The alignment of interests between the Group and third party investors remains a key differentiator of our Merchant Banking business. During the first half of 2018